Should I apply my windfall as extra principal or as a recast?

Pick by goal. Faster payoff: extra principal, no recast. Lower required payment: recast. Both: recast for lower required, then voluntarily keep paying the old amount.

How big does a lump sum need to be to matter?

Even small lumps help — every dollar of principal compounds. For a recast (servicer re-amortization), you typically need $5,000–$10,000 minimum. For an extra principal payment, any size works.

Will a lump sum change my interest rate?

No. A lump sum reduces your principal balance; it doesn't change the contracted rate. Only a refinance changes the rate.

Lump-sum mortgage payment calculator

A single lump sum applied to principal punches above its weight — earlier dollars do the most work. Here's how to estimate the impact and decide whether to recast.

What a lump sum does to your loan

When a one-time lump sum is applied to principal, your balance drops by exactly that amount. Every subsequent month is charged interest on the lower balance, so more of each scheduled payment goes to principal — compounding into faster payoff and less lifetime interest. The earlier in the loan you apply the lump, the larger the cumulative impact.

Two strategies — same lump sum, different goal

Apply as extra principal (no recast). Monthly payment stays the same; loan retires earlier. Use the extra payment calculator. Best for a faster-payoff goal.
Apply as a recast. Loan term stays the same; monthly payment drops. Use the recast calculator. Best for a lower-cash-flow goal.

Worked example

On a $320,000 loan at 6.5% over 30 years, a $25,000 lump sum applied at year 3 as extra principal (no recast) typically saves roughly $50,000–$60,000 in lifetime interest and shortens the loan by 3–4 years. Applied as a recast, the same $25,000 reduces the monthly payment by roughly $160 while preserving the 30-year maturity. Run your specific numbers in the calculator.

Why earlier dollars do more

The savings on each future month accrue against the lower balance. A $25,000 lump sum applied in year 3 saves interest on every remaining month — about 27 years' worth. The same lump sum applied in year 20 only saves interest on the remaining ~10 years. If your time horizon is long, sooner is better.

What to watch out for

Confirm your servicer applies the lump to principal, not as a future scheduled payment.
Don't deplete your emergency fund. Once the cash is in home equity, getting it back out costs time and money.
Compare the guaranteed return (your mortgage rate) with the after-tax expected return of alternative investments.
Most modern conventional loans don't have prepayment penalties — but read your note before sending a large lump sum.

Frequently asked

Should I apply my windfall as extra principal or as a recast?: Pick by goal. Faster payoff: extra principal, no recast. Lower required payment: recast. Both: recast for lower required, then voluntarily keep paying the old amount.
How big does a lump sum need to be to matter?: Even small lumps help — every dollar of principal compounds. For a recast (servicer re-amortization), you typically need $5,000–$10,000 minimum. For an extra principal payment, any size works.
Will a lump sum change my interest rate?: No. A lump sum reduces your principal balance; it doesn't change the contracted rate. Only a refinance changes the rate.

Sources and references

Helpful consumer references used to explain assumptions on this page. These are educational pointers, not regulatory endorsement.

CFPB — paying down your mortgage — consumer guidance on extra payments and how to ensure they go to principal
Internal — amortization with extras and recast scenarios — the engine simulates both extra-principal and re-amortization paths