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Recast, or Keep the Cash?

A recast is not free money — it is you lending $50,000 to yourself at your mortgage rate. This calculator compares that against the return the same cash could earn, over the same period, with the monthly saving reinvested.

Works offline No sign-up Nothing stored — refresh clears it
High-yield savings, CDs or a bond fund — use what you would actually earn, after tax.
Recasting is ahead by
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Value of the reinvested monthly savings, after the fee.
Keeping the cash is worth
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The same lump sum, compounded at your savings rate.
Net difference
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Positive means the recast wins on money alone.
Monthly payment reduction
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Interest saved over the term: —
Comparison runs to the end of the loan term and assumes you keep the loan that long, reinvest every monthly saving at the return you entered, and ignore tax. Principal and interest only — escrow and mortgage insurance are unaffected.

The interest saved by a recast is a strange number to quote, because most of it is your own money coming back. If $50,000 saves $56,200 of interest over 27 years, $50,000 of that was the deposit — the genuine gain is the remaining $6,200, spread thin. What actually matters is whether that $50,000 could earn more somewhere else, and that is a comparison almost nobody runs before sending the wire.

A recast is a loan to yourself at your mortgage rate

Paying principal down earns you exactly your mortgage rate, risk-free and tax-free. At 6.5%, $50,000 of principal saves $3,250 of interest in the first year, guaranteed, because the alternative was paying that interest. There is no product on the market that offers a guaranteed 6.5%.

That is the strongest argument for recasting, and it is genuinely strong in a 6.5% rate environment. It stops being strong the moment the cash can earn something comparable, or the moment the rate is 3% and a savings account pays more than the mortgage costs.

Why this is not a simple interest-versus-interest comparison

The naive version compares the interest saved against the interest earned and stops. That is wrong in both directions. The recast produces a monthly cash flow, not a lump sum, so to compare fairly you have to reinvest those monthly savings and let them compound. And the cash alternative compounds as a single sum from day one, which is a big head start.

Run both correctly and a clean rule falls out: whichever rate is higher wins, once tax is accounted for. If the mortgage costs 6.5% and the cash earns 4.25% after tax, every dollar applied to the mortgage beats every dollar left in savings — that is the whole result, and no amount of compounding changes it.

The number to remember: the break-even savings rate equals your mortgage rate after tax. Below it, the recast wins on money; above it, the cash does. Everything else is about liquidity.

The horizon problem

The comparison above runs to the end of the loan. That is a heroic assumption: most mortgages end early, through a sale or another refinance. If you sell in year five, the advantage you built by recasting arrives as extra equity at closing rather than as cash saved — real, but not spendable in the meantime.

This matters because the gap between the two routes grows over time. A five-year window tends to produce a modest difference either way; a twenty-seven-year window produces a large one. If you are unsure how long you will keep the loan, treat the long-run advantage as a tiebreaker rather than as the decision.

Tax, in both directions

Savings interest is taxed as ordinary income, so a 4.25% account is worth about 3.3% to someone in the 22% bracket. Mortgage interest is deductible only if you itemise, and for most borrowers the standard deduction is larger than the mortgage-interest deduction, which means the effective benefit is often zero.

Put the after-tax savings rate into the calculator and leave the mortgage rate alone unless you are certain you itemise. That combination is right for most people, and it tilts the comparison further towards the recast.

The thing the arithmetic cannot price

Cash in a savings account is available. Equity in a house is not, unless you sell or borrow against it — and borrowing against it later costs money and, in a falling market, may not be possible at all. Lenders froze home equity lines in 2008 and again in 2020.

So the honest framing is that recasting buys a guaranteed return at your mortgage rate and sells liquidity to get it. Whether that trade is good depends less on the rate spread than on whether the $50,000 is genuinely spare. If it is your emergency fund, the calculator is answering a question you should not be asking.

When each route wins

Recast wins when: the mortgage rate is materially above what cash earns after tax, you have years left on the loan, the lump sum is genuinely spare, and you want the lower required payment as well as the return.

Keeping cash wins when: the mortgage rate is low — a 3% loan against a 4.5% savings rate is a losing trade for the recast — or when the cash is your buffer, or when you expect rates on cash to rise and want to stay flexible.

Neither wins decisively when: the two rates are within half a point of each other. At that point, decide on liquidity and on whether you want the lower monthly payment, because the money is a coin flip.

What this cannot tell you

It cannot tell you whether your servicer offers recasts, what their minimum is, or whether they will decline you. It assumes a fixed rate and a fixed return, neither of which is guaranteed over 27 years. And it ignores the moment most decisions actually get made — when life changes and the plan does not survive contact with it.

Used properly, it does one thing well: it stops the recast from being justified by the big interest-saved number, which is mostly your own deposit returning home.

Frequently asked questions

The questions this comparison usually raises.

Q
Is it better to recast or keep the cash in savings?
On money alone, whichever rate is higher wins: paying principal earns your mortgage rate, and leaving the cash earns the savings rate. At a 6.5% mortgage against a 4.25% account, the recast wins by a wide margin once tax is applied to the savings interest. The trade-off is liquidity, which no rate comparison captures.
Q
Why is the interest saved figure so much larger than the real benefit?
Because most of it is your own money. On a $50,000 reduction at 6.5% over 27 years, the total interest saved is about $56,200 — and $50,000 of that is the deposit itself. The genuine gain is the difference, earned at your mortgage rate over the remaining term. Thinking of it as "your money coming back with interest" keeps the comparison honest.
Q
What return do I need on the cash to beat a recast?
Your mortgage rate after tax. Below that, applying the money to the mortgage is the better financial move; above it, the cash is. In practice that means a 6.5% mortgage is very hard to beat with a savings account, and a 3% mortgage is very hard to justify paying down while cash pays more than 3%.
Q
Does this assume I keep the loan for the whole term?
Yes, and that is the weakest assumption in the model. Most mortgages end early. If you sell, the advantage appears as extra equity at closing rather than as spendable cash, and the gap between the two routes is smaller over a short horizon. Treat the long-run number as a tiebreaker, not as the decision.
Q
Should I account for the mortgage interest deduction?
Only if you actually itemise. Since the standard deduction rose, many borrowers get no benefit from mortgage interest at all, which means the effective cost of the loan equals the nominal rate. If you do itemise, reduce the mortgage rate by your marginal rate before comparing, and reduce the savings rate in the same way.
Q
Where does the recast fee fit in?
It is a real cost, so the calculator subtracts it from the recast side. At $150 to $500 against a meaningful monthly saving, it changes the answer only when the lump sum is small or the horizon is short — but it is not nothing, and it is occasionally non-refundable even if the request is declined.
Q
Does the calculator store my numbers?
No. It runs entirely in your browser, there is no server involved, and nothing is written to your device. Refresh the page and every figure resets. A loan calculator that asks for your balance and then asks for an email address is collecting leads, not calculating.