Refinance vs Recast
You came into a lump sum — inheritance, bonus, sale of something — and want a lower mortgage payment. Two ways to do it. Refinancing replaces the loan; recasting re-amortizes it.
Your mortgage
Recast assumes you apply the lump sum to principal, then the lender re-amortizes the remaining balance over the same remaining term at your existing rate.
Refinance
Apply the lump sum as down on a new loan at the new rate + new term. Closing costs come out of pocket.
New monthly payment
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Total interest from today
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Out-of-pocket today
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Recast
Same loan, same rate. Lump sum applies to principal; payments re-amortize over the same remaining term.
New monthly payment
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Total interest from today
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Out-of-pocket today
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How they differ
- Refinance replaces your old loan with a brand-new one. You can change the rate, the term, the lender — anything. But you pay closing costs (origination, title, appraisal) of 2–5% of the loan, and your loan term typically resets to 30 (or 15) years.
- Recast keeps the loan exactly as it is. You put a lump sum against principal, and the lender re-amortizes the remaining balance over the remaining original term. Same rate, same end date, much lower monthly payment. Most lenders charge a flat fee (~$250).
When refinance wins
When current rates are meaningfully lower than your existing rate (~1+ percentage point). The savings from the lower rate eventually outweigh the closing costs. Use our refinance calculator to find the break-even month.
When recast wins
- You like your current rate (especially if you locked in during low-rate years).
- Current refi rates are equal to or higher than what you have.
- You just want a lower payment without restarting the clock.
- The recast fee (~$250) is much less than refi closing costs (~$4,000+).
The big asterisk
Not every loan is recastable. FHA, VA, and most jumbo loans can't be recast — they were originated with rules that lock the amortization schedule. Conventional Fannie/Freddie loans usually allow one recast per loan. Call your servicer before assuming this is an option.
FAQ
Could I just pay down principal without recasting?
Yes — extra principal payments shorten the term but leave the monthly payment unchanged. Recast leaves the term unchanged but lowers the monthly. Pick whichever you actually need.
Does recast reset the loan?
No. Your existing rate, term, and contract stay intact. It's the same loan with a different remaining balance and re-calculated payment.
What if rates drop further later?
You can still refinance after a recast. They're not mutually exclusive — a recast now buys you the option to refinance later.