How it works
You start with your Remaining balance, which represents your current principal balance before applying any lump sum. The calculator assumes you are partway through a fixed‑rate amortizing loan.
You enter a Lump-sum payment amount—the extra principal you plan to send to your servicer as part of a recast request. The new principal after recast is modeled as New balance ≈ Remaining balance − Lump sum (capped at zero).
The calculator keeps your existing Interest rate (APR) and Remaining term (years) the same. It uses a standard fixed‑rate amortization formula to compute a baseline monthly payment based on the remaining balance, rate, and term if you do not provide a Current monthly payment.
Specifically, it converts APR to a monthly rate r and years to months n, then computes Payment ≈ P × r / (1 − (1 + r)^(−n)), where P is the principal. This formula is used to estimate both the current payment (if needed) and the new payment after recasting.
If you enter a Current monthly payment, the calculator uses that as the baseline instead of recomputing it. This makes the comparison more accurate when your actual payment differs slightly from the theoretical amortization due to rounding or prior extra payments.
After the recast, it recomputes a New monthly payment using the reduced New balance, the same rate, and the same remaining term. Payment reduction ≈ Current payment − New payment (if a current payment is provided or estimated).
To estimate interest saved, the calculator compares approximate total remaining interest under the current schedule to total interest under the recast scenario. Remaining interest if you do nothing is approximated as (Current payment × n) − Remaining balance. Interest on the recast path is approximated as (New payment × n) − New balance. Interest saved ≈ Old remaining interest − New interest.
Because it assumes level payments and does not model future extra prepayments or rate changes, the interest‑saved figure is an approximation—but it gives you a good sense of the tradeoff between using cash for a recast versus keeping it in savings or investments.
Formula
Baseline payment (if needed): Payment ≈ P × r / (1 − (1 + r)^(−n)), where P = Remaining balance, r = APR ÷ 12, n = Remaining term in months
New balance ≈ Remaining balance − Lump sum
New payment ≈ New balance × r / (1 − (1 + r)^(−n))
Old remaining interest ≈ (Current payment × n) − Remaining balance
New interest ≈ (New payment × n) − New balance
Interest saved ≈ Old remaining interest − New interest
Payment reduction ≈ Current payment − New payment
