A mortgage recast and a refinance both can lower a payment, but they work differently. A recast keeps your existing rate and note while re-amortizing after a lump-sum principal payment. A refinance replaces the loan with a new rate, term, and closing costs. Choose with math, not slogans.
What a recast does
After you pay a large principal lump sum, some servicers allow a recast: same interest rate, remaining term re-amortized into a lower payment. Fees are often modest compared with refinance closing costs. Use the mortgage recast calculator to estimate the new payment.
What a refinance does
A refinance pays off the old loan with a new one. You may chase a lower rate, change term length, or pull cash out. Closing costs, appraisal, and credit checks apply. Model the new payment with the mortgage calculator and include fees in break-even months.
Side-by-side decision points
- If your rate is already strong and you have cash to apply to principal, recast may win.
- If market rates are meaningfully lower than your note rate, refinance may win even after costs.
- If you need cash out or term reset, refinance is the tool; recast is not.
- If you want to keep the same rate and simply lower payment after a windfall, start with recast eligibility.
Worked comparison sketch
Balance $280,000 at 6% with many years remaining. A $40,000 principal payment plus recast lowers payment without changing 6%. A refinance to 5% might lower payment further but could cost $4,000–$7,000 in closing costs. Divide costs by monthly savings for a rough break-even. If you may move within two years, costly refinances often lose.
Servicer rules and eligibility
Not every loan type or investor allows recast, and minimum lump sums apply. Ask your servicer for written recast terms before you wire funds. FHA, VA, and other program rules can differ from conventional notes.
Fee and break-even worksheet
List recast fee (often modest) versus refinance closing costs (often thousands). Divide each cost by the monthly payment reduction to estimate months to break even. If you may move before break-even, the “better rate” can still lose.
Also compare total interest over your expected remaining years, not only the new payment. A refinance that resets a long term can lower payment while extending interest years.
Confirm whether your loan investor allows recast at all before you wire a lump sum expecting a payment change.
Frequently Asked Questions
Does a recast change my interest rate?
Usually no. It re-amortizes the remaining balance at the existing rate.
Does a refinance always save money?
Only if rate/term benefits clear closing costs inside your expected ownership window.
Can I recast and later refinance?
Often yes, but confirm with current lenders. Prior recasts do not remove refinance underwriting.
Practical next step
Run the lump-sum path in the Mortgage Recast Calculator, then compare a new-rate path in the Mortgage Calculator. Pick the option whose break-even fits how long you will keep the home.