What a mortgage recast is
A recast (sometimes called re-amortization) keeps your existing loan exactly as it is — same interest rate, same remaining term, same lender — but recalculates your monthly payment after you make a large lump-sum payment toward principal. Your servicer applies the lump sum, then re-amortizes the now-smaller balance over your remaining term. The result is a lower required monthly payment. You keep your original rate, which is a major advantage if that rate is lower than what's currently available.
Recasting is usually inexpensive — many servicers charge a modest flat fee (often somewhere in the low hundreds of dollars; confirm your servicer's exact fee) — and typically requires no credit check, income re-verification, or new appraisal, because you aren't taking out a new loan. Not all loans are eligible: many government-backed loans (FHA, VA, USDA) generally cannot be recast, and servicers usually set a minimum lump-sum amount. Confirm eligibility and the minimum with your servicer before counting on it.
What a refinance is
A refinance replaces your existing mortgage with an entirely new loan — potentially at a different interest rate and a different term. People typically refinance to capture a lower interest rate, to change their term (for example, from a 30-year to a 15-year), or to switch loan types. Because it's a brand-new loan, a refinance generally involves a full application: credit check, income and asset verification, a new appraisal, and closing costs (commonly a few percent of the loan amount). It also usually resets your amortization clock — a fresh 30-year term restarts the interest-heavy early years unless you deliberately choose a shorter term.
Worked example: recast after a $50,000 lump sum
Suppose you took a $300,000 mortgage at 6.5% for 30 years (payment ≈ $1,896.20/month). After 5 years of on-schedule payments your balance is about $280,833. You then apply a $50,000 lump sum. Here's what each choice does with that lump sum, computed with the same amortization math as this site's mortgage calculator:
| Recast (re-amortize $230,833 over remaining 25 yrs) | Keep same payment (no recast) | |
|---|---|---|
| New monthly payment | ~$1,558.60 | $1,896.20 (unchanged) |
| Remaining term | 25 years | ~16 years, 8 months |
| Interest left to pay | ~$236,700 | ~$147,200 |
Figures rounded, same interest rate in both columns. This shows the core trade-off: recasting buys lower monthly cash flow, while applying the lump sum without recasting maximizes interest savings. Reproduce with the amortization schedule.
Note what this example is not comparing: it isn't a rate change. A recast never changes your rate — the interest difference above comes purely from the smaller balance and how the remaining term is set. A refinance, by contrast, is worth considering specifically when current rates are meaningfully lower than your existing rate, because that's the lever a recast cannot pull.
Which one makes sense when
- You have a lump sum and your current rate is already good → recast. You lower your payment cheaply while keeping a rate you'd hate to lose. (If your goal is minimum interest rather than lower payments, consider applying the lump sum without recasting — see how extra payments save interest.)
- Current market rates are meaningfully lower than your rate → look at a refinance. Only a new loan can change your rate. Weigh the closing costs against the monthly savings to find your break-even point.
- You want to change your term or loan type → refinance. A recast can't shorten your term or switch you from, say, an adjustable to a fixed rate; a refinance can.
- You want to pull cash out of your equity → cash-out refinance. A recast only ever reduces your balance; it can't give you money back.
Frequently asked questions
Does recasting a mortgage save on interest?
It saves some interest because your balance is smaller, but its main purpose is lowering the monthly payment, not minimizing total interest. If your priority is paying the least interest possible, applying the same lump sum without recasting — keeping your original higher payment so the loan ends sooner — usually saves more overall, as the worked example shows. Recasting trades some of that interest savings for improved monthly cash flow.
Is a recast cheaper than a refinance?
Almost always, yes. A recast typically involves a small flat servicer fee and no appraisal, credit check, or closing costs, because you're keeping the same loan. A refinance is a new loan with full underwriting and closing costs that commonly run a few percent of the loan amount. The trade-off is that a recast can't change your interest rate or term — a refinance can.
Can I recast any mortgage?
No. Eligibility depends on your loan type and servicer. Many government-backed loans (FHA, VA, USDA) generally can't be recast, and servicers usually require a minimum lump-sum amount and charge a fee. Always confirm eligibility, the minimum, and the fee with your specific servicer before planning around a recast.
Does refinancing restart my loan term?
It can. A refinance is a new loan, so choosing a fresh 30-year term restarts the amortization clock — meaning you're back in the interest-heavy early years (see why early payments are mostly interest). To avoid that, you can refinance into a shorter term that matches or beats your remaining years, though that typically raises the monthly payment.