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Adjustable Rate Mortgage (ARM) Recast Calculator

Enter your original loan details, current balance, lump sum payment, and new rate to see your recast monthly payment, total interest saved, and break-even timeline.
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Luis GonzalezCreated by Luis GonzalezLast updated:

How to Use This Calculator

  1. 1

    Enter Current Loan Balance

    Input your remaining mortgage balance at the time of the recast.

  2. 2

    Enter the New Interest Rate

    Input the adjusted interest rate after the recast.

  3. 3

    Set the Remaining Term

    Enter the number of years remaining on your original mortgage term.

  4. 4

    Compare Payments

    Review the new monthly payment compared to your previous payment.

Example Calculation

A 5/1 ARM reaching its first rate adjustment after 5 years of payments.

Remaining Balance

$285,000

New Rate

7.25%

Previous Rate

5.0%

Remaining Term

25 years

Results

Previous monthly payment

$1,862. New recast payment: $2,059. Monthly increase of $197. If the rate adjusts again to 8.25% next year, the payment would rise to $2,224.

Tips

Make a Lump-Sum Payment Before Recast

Reducing your balance before a recast lowers the new payment calculation, offsetting the effect of a rate increase.

Know Your Recast Dates

Mark your calendar for upcoming adjustment dates so you can plan finances and consider alternatives like refinancing.

Request a Voluntary Recast

Some lenders allow voluntary recasts after large principal payments. This can lower your required payment without refinancing.

Optimizing Your ARM with the Adjustable Rate Mortgage (ARM) Recast Calculator

The Adjustable Rate Mortgage (ARM) Recast Calculator helps homeowners understand the impact of making a lump sum principal payment and recalculating their monthly mortgage payments. This tool provides clarity on how to reduce your financial burden without refinancing. For example, applying a $10,000 lump sum to a $200,000 ARM balance at 3.5% with 20 years remaining reduces your monthly payment to $1,101.92, saving $418/month compared to the original $1,520.06 payment.

The Amortization Logic of an ARM Recast

An ARM recast involves recalculating the monthly mortgage payment based on a new, lower principal balance, while keeping the remaining loan term. It's a re-amortization process.

The logic is as follows:

  1. Calculate Original Monthly Payment: Determine the payment for the Original Loan Amount over the Original Loan Term at the Original Interest Rate.
  2. Calculate Recast Loan Balance: Subtract the Lump Sum Principal Payment from the Current Balance.
  3. Calculate New Monthly Payment: Using the Recast Balance, the New Interest Rate, and the New Loan Term, calculate the new monthly payment.
  4. Compare: The calculator shows the difference in monthly payments, total interest, and all-in cost between the original and recast scenarios.
Recast Loan Balance = Current Balance - Lump Sum Principal Payment
Monthly Rate = New Interest Rate / 1200
New Monthly Payment = (Recast Balance x Monthly Rate x (1 + Monthly Rate)^Months) / ((1 + Monthly Rate)^Months - 1)
Break-Even Period = Lump Sum / Monthly Savings
💡 For a straightforward calculation of standard mortgage payments, our Simple Mortgage Calculator can help you quickly assess basic loan scenarios.

Worked Example: Recasting an ARM

A homeowner decides to recast their ARM with these details:

  1. Original Loan Amount: $300,000 at 4.5% for 30 years
  2. Current Balance: $200,000
  3. Lump Sum Payment: $10,000
  4. New Interest Rate: 3.5% (current ARM adjusted rate)
  5. New Loan Term: 20 years remaining

Here's the calculation:

  • Original Monthly Payment: $300,000 at 4.5% for 30 years = $1,520.06/mo.
  • Recast Loan Balance: $200,000 - $10,000 = $190,000.
  • New Monthly Payment: $190,000 at 3.5% for 20 years = $1,101.92/mo.
  • Monthly Savings: $1,520.06 - $1,101.92 = $418.13/mo.
  • Break-Even Period: $10,000 / $418.13 = 24 months.
  • Interest Saved: Original total interest ($247,220) minus recast interest ($74,462) = $172,759.
  • Without the lump sum (keeping $200,000 at 3.5% for 20 years), the payment would be $1,159.92 — so the $10,000 lump sum itself reduces the payment by $58/mo and saves $3,919 in interest.
💡 If you are evaluating other adjustable-rate loan scenarios, our Variable Mortgage Rate Calculator can help you understand how changing rates impact your payments.

When Recasting Makes Financial Sense

Mortgage recasting is most attractive when you receive a windfall (inheritance, bonus, property sale) and want lower payments without the cost of refinancing. A typical recast fee is $150-$300 compared to 2-5% of loan value for refinancing. Recasting makes the most sense when your break-even period is under 24 months and you plan to stay in the home beyond that point. If current market rates are significantly lower than your ARM's rate, compare the recast savings against a full refinance before committing.

Lender Requirements for Mortgage Recasting

Most lenders require a minimum lump sum of $5,000-$10,000, a loan that is current and in good standing, and charge a small administrative fee ($150-$300). Government-backed loans (FHA, VA, USDA) are generally not eligible for recasting. Conventional loans typically qualify. Contact your specific loan servicer to confirm eligibility and understand their process before making a lump sum payment.

Frequently Asked Questions

What is an ARM recast?

An ARM recast recalculates your monthly payment based on the current loan balance, remaining term, and the new interest rate at the time of adjustment. This ensures the loan is fully amortized by the end of the original term despite rate changes.

How does a recast differ from refinancing?

A recast adjusts your payment based on your existing loan terms and current balance without creating a new loan. Refinancing replaces your entire mortgage with a new one, potentially with different terms, rate, and fees. Recasting is simpler and usually cheaper.

When does an ARM recast typically occur?

ARM recasts happen at each rate adjustment date, as defined in your loan agreement. For a 5/1 ARM, the first recast occurs at year 5 and then annually. Some negative amortization loans have mandatory recasts when the balance exceeds a certain threshold.