Direct Answer
A recast lowers your monthly payment after a lump-sum principal payment while keeping your existing rate and term — fees are typically $0 to $500. A refinance replaces the loan entirely, which is best when rates have dropped or you need cash out, but closing costs run 2% to 5% of the balance. On a $300,000 balance at 6.0%, a $50,000 lump-sum recast drops the payment from $1,933 to $1,611 — a $322/month reduction.
Compare both with the Mortgage Recast Calculator and Refinance Calculator.
Last verified on: June 28, 2026
Editorial note: Not all loans are recast-eligible. Federal Housing Administration (FHA) and U.S. Department of Veterans Affairs (VA) mortgages generally cannot be recast. Servicer policies vary.
Research method: Daily Calcs modeled recast and refinance scenarios on a $300,000 balance at 6.0% with 25 years remaining and a $50,000 lump sum. Consumer Financial Protection Bureau (CFPB) refinance guidance reviewed June 28, 2026.
Side-by-Side Comparison
| Feature | Recast | Refinance |
|---|---|---|
| Changes your rate | No | Yes |
| Changes your term | No | Yes (your choice) |
| Requires a lump sum | Yes ($5k-$10k+ typical) | No |
| Typical cost | $0-$500 | 2%-5% of balance |
| Credit pull / re-underwriting | No | Yes |
| Shortens payoff if you pay minimum | No | Can extend or shorten |
| Best when | Windfall + good existing rate | Rates dropped or cash-out needed |
Worked Example: $300,000 at 6.0%
Starting point: $300,000 balance, 6.0% rate, 25 years remaining, payment ~$1,933/month.
Option A: Recast after $50,000 lump sum
| Before | After recast | |
|---|---|---|
| Balance | $300,000 | $250,000 |
| Rate | 6.0% | 6.0% |
| Remaining term | 25 years | 25 years |
| Monthly payment | $1,933 | $1,611 |
| Monthly savings | — | $322 |
| Recast fee (est.) | — | $250 |
Option B: Refinance $250,000 at 5.0% (after $50k principal)
| Refinance scenario | |
|---|---|
| New balance | $250,000 |
| New rate | 5.0% |
| New term | 30 years (reset) |
| Monthly payment | ~$1,342 |
| Closing costs (est. 3%) | ~$7,500 |
| Break-even vs recast savings | ~23 months on payment difference alone |
Refinancing lowers the payment more but resets to 30 years and adds $7,500 in closing costs. If you plan to move within five years, recast may win. If you will stay 10+ years and rates stay low, refinance may win.
Decision Framework
| Your situation | Likely best option |
|---|---|
| Got a bonus; love your 3.5% rate | Recast |
| Market rates 0.75%+ below your rate | Refinance |
| Want lowest total interest | Extra principal (no recast) |
| Need cash from equity | Cash-out refinance |
| FHA or VA loan | Refinance (recast usually unavailable) |
Worked Example: Five-Year Hold Comparison
Same starting point: $300,000 balance, 6.0% rate, 25 years remaining, $50,000 lump sum available, planning to sell or move in 5 years.
Path 1 — Recast ($50k lump sum, $250 fee)
| Metric | Value |
|---|---|
| New payment | $1,611/month |
| Monthly savings vs before | $322 |
| 5-year payment savings | $322 × 60 = $19,320 |
| Minus recast fee | −$250 |
| 5-year net cash benefit | ~$19,070 |
| Remaining balance at year 5 | ~$218,000 (lower than no action) |
You keep your 6.0% rate — valuable if market rates rise. Payoff date stays the same unless you voluntarily pay extra.
Path 2 — Refinance ($250k at 5.0%, 30-year reset, $7,500 closing)
| Metric | Value |
|---|---|
| New payment | ~$1,342/month |
| Monthly savings vs original | $591 |
| 5-year payment savings | $591 × 60 = $35,460 |
| Minus closing costs | −$7,500 |
| 5-year net cash benefit | ~$27,960 |
| Remaining balance at year 5 | ~$228,000 (term reset adds back months) |
Refinance wins on monthly cash flow over five years, but you reset to 30 years — if you stay past year 5, total interest may exceed the recast path because the clock restarted.
Path 3 — Extra principal only (no recast, no refinance)
Apply $50,000 to principal, keep the $1,933 payment. The loan pays off faster and total interest drops the most, but no monthly payment relief. Best when cash flow is comfortable and your goal is minimum total cost.
Takeaway for a 5-year hold: Refinance often wins on cumulative payment savings if closing costs are reasonable. Recast wins when you want a lower payment without losing a low rate or paying refinance fees. Extra principal wins when total interest minimization matters more than monthly breathing room.
Which Should You Choose?
- Keep your rate, want a lower payment, have a lump sum: recast.
- Market rates are well below yours, or you need cash: refinance.
- You want to pay off sooner: skip both and apply extra to principal — see the Mortgage Payoff Calculator.
Government loans such as FHA and VA mortgages generally cannot be recast, so refinancing (including a streamline refinance) is usually the path for those borrowers.
Pre-Decision Checklist
- Confirm your loan is recast-eligible with your servicer
- Get the recast fee and minimum lump-sum amount in writing
- Request refinance Loan Estimate for comparison on the same day
- Calculate refinance break-even months in the Refinance Calculator
- Model recast payment drop in the Mortgage Recast Calculator
- Consider keeping the old payment after recast to shorten the term
Calculator Methodology
Recast re-amortizes: same rate and remaining months, new lower balance.
New payment = P × r(1 + r)^n / ((1 + r)^n - 1)Refinance replaces the loan with new P, r, and n plus closing costs.
Limitations: Servicer rounding, escrow adjustments, and private mortgage insurance (PMI) timing are not modeled. Not a Loan Estimate.
Related Reading
- How to Pay Off Your Mortgage Early — the third option
- Refinance vs Extra Payments — a related comparison
- PMI Removal Guide — another way to cut your payment
- When Will Mortgage Rates Go Down? — context for refinance timing
Official and Supporting Sources
Next Step
Enter your balance, rate, remaining term, and lump sum in the Mortgage Recast Calculator, then compare against a refinance quote in the Refinance Calculator.
Frequently Asked Questions
What is a mortgage recast?
A mortgage recast, also called re-amortization, lets you make a large one-time principal payment and have your servicer recalculate the required monthly payment over the remaining term at the same interest rate. Because the balance is lower but the rate and payoff date are unchanged, the new monthly payment is smaller. A recast does not give you a new loan, pull your credit, or change your rate. It simply spreads a smaller balance across the months you have left, which is why the fee is usually modest.
When is refinancing the better choice?
Refinancing wins when current market rates are meaningfully below your existing rate, when you want to change the loan term, or when you need to pull cash out of your equity. Because a refinance replaces your loan entirely, it can lower both your rate and payment, but it comes with closing costs of roughly 2% to 5% of the balance and resets the amortization clock. Run the numbers in a refinance calculator to confirm the monthly savings clear your break-even point before you commit.
How large a lump sum do I need to recast?
Servicers commonly require a minimum principal curtailment of about $5,000 to $10,000 to qualify for a recast, though the exact threshold varies by lender. The larger the lump sum relative to your balance, the bigger the payment reduction. A recast makes the most sense when you have received a windfall — a bonus, an inheritance, or proceeds from selling another property — and want to lower your payment without giving up a low rate or paying full refinance closing costs. Always confirm the minimum and fee with your servicer first.
Does a recast shorten my loan term?
No. A recast keeps the original payoff date and simply lowers the required monthly payment to reflect the smaller balance. If your goal is to pay the loan off sooner rather than to reduce the payment, you should instead keep paying your original (higher) monthly amount after the lump sum, or skip the recast entirely and apply extra to principal. You can also recast for breathing room now and then voluntarily pay extra later to shorten the term.
Can I both recast and refinance?
In practice you choose one at a time based on your rate. If you are happy with your current interest rate and simply want a lower payment after a lump-sum payment, recast. If market rates have fallen far enough to justify closing costs, refinance instead, which lets you reset both the rate and the term. Some borrowers refinance into a better rate first and then recast later if they receive a windfall, but you would rarely do both in the same transaction.
Recast vs extra principal payment: Which should I do?
Extra principal without recasting shortens the loan and saves the most total interest while keeping your required payment unchanged. Recasting lowers the mandatory payment after a lump sum — useful if you need monthly cash-flow relief. A hybrid approach: recast for a lower required payment, then continue paying the old amount voluntarily to accelerate payoff. Refinance is a third path when rates have dropped enough to justify closing costs.
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