How this number is made
A recast applies a lump sum to principal and rebuilds the payment over the years that are left, at the same rate. It is not a refinance. Not every servicer offers it, and some charge a small fee this page ignores.
- Years left are the remaining term, not a new 30.
- The lump sum has to be accepted as principal.
Formula
New balance = old balance − lump sum. New payment = amortizing payment on that balance, same rate, remaining years.
Worked example
With the figures already in the form, payment after the recast is $1,752.87.
Questions
How is this different from extra monthly payments?
Extra payments keep the required payment the same and shorten the loan. A recast lowers the required payment and keeps the end date.
Does the rate change?
Not in a recast. If the rate changes, you are refinancing.