How to Use This Calculator
- 1
Enter the Original Loan Amount
Input the total amount borrowed on your original ARM mortgage, in dollars.
- 2
Enter the Original Interest Rate
Input the annual interest rate on your original ARM loan as a percentage.
- 3
Enter the Original Loan Term
Input the total repayment period of your original mortgage in years.
- 4
Enter the Current Balance
Input the remaining principal balance owed on your mortgage today, in dollars.
- 5
Enter the Lump Sum Principal Payment
Input the one-time extra principal payment you will apply at the time of the recast, in dollars.
- 6
Enter the New Interest Rate
Input the adjusted annual interest rate after the ARM recast, as a percentage.
- 7
Enter the New Loan Term
Input the remaining repayment period after the recast, in years.
- 8
Review Your Results
The calculator displays your New Monthly Payment, Interest Saved, Break-Even Period, and Total All-In Cost. The Recast Impact Breakdown panel separates the effect of the rate change from the lump sum payment. Scroll down for the balance comparison chart and original vs recast table.
Example Calculation
A homeowner with a $200,000 current ARM balance makes a $10,000 lump sum payment and recasts at 3.5% for the remaining 20 years.
Original Loan Amount ($)
300,000
Original Interest Rate (%)
4.5
Original Loan Term (years)
30
Current Balance ($)
200,000
Lump Sum Principal Payment ($)
10,000
New Interest Rate (%)
3.5
New Loan Term (years)
20
Results
New Monthly Payment
$1,101.92
Interest Saved
$172,759
Break-Even Period
24 mo
Total All-In Cost (Recast)
$274,462
Tips
Separate the Rate Drop from the Lump Sum
The Recast Impact Breakdown shows that without the $10,000 lump sum, your payment would be $1,160/mo at 3.5%. The lump sum itself only saves $58/mo — the 1pp rate drop from 4.5% to 3.5% drives most of the $418/mo total savings. This helps you decide if the lump sum is worth the cash outlay.
Check the Break-Even Period
The break-even tells you how long until your monthly savings recoup the lump sum. At 24 months, the $10,000 earns back through $418/mo savings. If you might sell or refinance before then, the lump sum may not pay off.
Use the Comparison Table
The Original vs Recast table shows side-by-side monthly payments, total interest, term, and all-in cost. This makes it easy to see the total financial impact — not just the monthly payment change.
Verify with Your Lender First
Not all lenders offer recasting, and most require a $5,000-$10,000 minimum lump sum plus a $150-$300 fee. Government-backed loans (FHA, VA, USDA) generally don't qualify. Confirm eligibility before committing funds.
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:
- Calculate Original Monthly Payment: Determine the payment for the Original Loan Amount over the Original Loan Term at the Original Interest Rate.
- Calculate Recast Loan Balance: Subtract the Lump Sum Principal Payment from the Current Balance.
- Calculate New Monthly Payment: Using the Recast Balance, the New Interest Rate, and the New Loan Term, calculate the new monthly payment.
- 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
Worked Example: Recasting an ARM
A homeowner decides to recast their ARM with these details:
- Original Loan Amount: $300,000 at 4.5% for 30 years
- Current Balance: $200,000
- Lump Sum Payment: $10,000
- New Interest Rate: 3.5% (current ARM adjusted rate)
- 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.
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.