Key takeaways
- A recast keeps your rate and term and lowers your payment by shrinking the balance. A refinance replaces the loan with a new rate and term.
- Recasting costs a fee of roughly $150–$500. Refinancing usually costs 2%–6% of the loan in closing costs.
- If you like your current rate and have a lump sum, a recast is cheap and simple. If rates have dropped a lot, or your loan can't be recast, refinancing may fit better.
Recasting and refinancing can both lower your monthly mortgage payment, but they work in very different ways and suit different situations. The short version: a recast lowers your payment by shrinking your balance, while a refinance replaces your loan with a new one at a new rate and term.
The key differences
| Recast | Refinance | |
|---|---|---|
| What happens | Same loan, re-amortized after a lump-sum payment | A new loan pays off the old one |
| Interest rate | Stays the same | Changes to the new loan's rate |
| Loan term | Stays the same | Resets to whatever term you choose |
| Cash needed | A lump sum, often $5,000 or more | Closing costs, unless rolled into the loan |
| Typical cost | Fee of roughly $150–$500 | Closing costs, commonly 2%–6% of the loan |
| Credit check / appraisal | Usually not | Yes |
| Eligible loans | Mostly conventional; generally not FHA, VA, or USDA | Almost any loan type |
| Time to complete | About 45–60 days | Often 30–45 days or more |
When a recast makes more sense
- Your current rate is good. If rates have risen since you got your loan, refinancing would mean giving up your rate. A recast keeps it.
- You have a lump sum available. Proceeds from selling a previous home, an inheritance, or savings beyond your emergency fund.
- You want to avoid closing costs. A few hundred dollars versus several thousand.
- Your credit or income has changed. A recast usually doesn't require requalifying.
When a refinance makes more sense
- Rates have dropped meaningfully below your current rate, enough that the savings outweigh closing costs over the time you expect to stay.
- You want to change your term, such as moving from a 30-year to a 15-year loan.
- You want to switch loan types, such as from an adjustable rate to a fixed rate, or from FHA to conventional to drop mortgage insurance.
- You need to take cash out rather than put cash in.
- Your loan can't be recast, as with most FHA, VA, and USDA loans.
A quick example
Say you owe $320,000 at 6.5% with 27 years left, so your principal and interest payment is about $2,100.
- Recast with $50,000: the payment drops to about $1,770, for a fee of a few hundred dollars. Your rate stays 6.5%.
- Refinance to 5.5% on a new 30-year loan without paying anything down: the payment drops to about $1,817, but you'd pay closing costs (perhaps $6,000–$12,000 on this balance) and add three years to your payoff date.
Neither is automatically better. If you have the cash and like your rate, recasting is cheap and simple. If rates have fallen a lot and you don't have a lump sum, refinancing may be the only way to lower your payment. You can also do both in sequence: pay down principal at closing when you refinance.
Questions to ask your lender
- Is my loan eligible for a recast, and what is the fee?
- What is the minimum lump sum?
- How long does it take for the new payment to take effect?
- If I refinance instead, what would my rate and total closing costs be?
Run your own numbers with the mortgage recast calculator to see your new payment and fee break-even.
More recast guides
- How to Request a Mortgage Recast
- Is a Mortgage Recast Worth It?
- Recasting After Buying a New Home
- Recasting and PMI Removal
- Recasting With a Windfall
- Mortgage Recast vs. Biweekly Payments
- Mortgage Recast vs. HELOC
- Recasting ARM and Jumbo Loans
- Recasting vs. Extra Mortgage Payments
- Mortgage Recast Glossary