Mortgage Recast vs Extra Principal vs HYSA Arbitrage Calculator
Compare recasting your mortgage to slash your monthly payment vs paying extra principal to finish years earlier vs keeping the cash in high-yield savings.
11. Current Mortgage Details
Your locked-in note rate (e.g., 2.75% to 7.25%)
22. Lump-Sum Cash Available
One-time funds (bonus, home sale proceeds, inheritance)
Standard flat servicer fee typically between $250 and $500
33. Alternative Investment Baseline
Used to compute true after-tax yield on interest income
Lender re-amortizes the remaining balance over the original term, permanently lowering your required monthly payment.
You apply the cash directly to principal; payments remain unchanged, knocking years off your maturity date.
You maintain your existing mortgage schedule and invest the liquid lump sum in high-yield cash equivalents.
📌 What is a Mortgage Recast and how does it work?
Unlike a costly refinance that requires income re-verification, underwriting, and thousands in appraisal/closing costs, a Mortgage Recast is a simple re-amortization service offered by conventional loan servicers (Fannie Mae & Freddie Mac) for a nominal $250–$500 fee. You pay down principal, keep your exact interest rate and maturity date, and your required monthly check shrinks immediately. Note: FHA and VA loans do not permit recasting.
How it works
1
Enter your current mortgage principal balance, locked interest rate, and remaining loan term in years.
2
Provide your one-time lump-sum cash contribution and your lender's recast administrative fee ($250–$500).
3
Input current high-yield savings / Treasury yields and your marginal federal tax bracket.
4
Inspect your new lower monthly payment, monthly budget savings, break-even payback period, and interest rate arbitrage verdict.
Frequently asked questions
What is a mortgage recast and how does it work?
A mortgage recast is a loan re-amortization feature where you make a lump-sum payment toward your principal balance, and your servicer re-calculates your remaining monthly payments based on the new reduced balance. Your interest rate and maturity date remain completely unchanged.
How does a recast differ from standard extra principal payments?
An extra principal payment shortens your loan term and pays off the mortgage early, but your required monthly bill stays the same. A recast preserves your original maturity date and directly cuts your monthly payment, freeing up immediate monthly budget cash flow.
Which US mortgages are eligible for a recast?
Most conforming conventional loans backed by Fannie Mae and Freddie Mac, as well as many Jumbo loans, allow recasting. Government-backed mortgages (FHA, VA, and USDA loans) legally do not permit recasting.
What is mortgage interest arbitrage?
If you have a 3.0% mortgage rate from 2020–2021, and safe cash accounts (Treasuries or HYSAs) yield 4.5% to 5.0% gross (over 3.5% after taxes), you earn more net wealth and preserve emergency liquidity by investing rather than prepaying your low-cost debt.
Is this tool free?
Yes. The site is supported by ads, so you never pay or need to create an account.
Does it work on mobile?
Yes. The page adapts to your screen and does not require installing any app.