Short answer: if your current mortgage rate is already competitive and you have a lump sum to put down, a recast (re-amortization) usually wins — it costs a few hundred dollars, requires no credit check or appraisal, and lowers your monthly payment while keeping your rate and payoff date. A refinance wins when market rates are meaningfully below your current rate, because it’s the only way to lower the rate itself — but closing costs run into the thousands and it usually resets your loan term.
What each option actually does
A mortgage recast keeps your existing loan — same interest rate, same maturity date — but after a large lump-sum payment toward principal, your servicer recalculates your monthly payment on the smaller balance. Most servicers charge a flat fee of $150–$500 (often around $250) and require a minimum principal payment — commonly $5,000–$10,000 — though policies vary. No credit check, no appraisal.
A refinance replaces your mortgage with a brand-new loan: new rate, new term, new underwriting — credit pull, appraisal, and closing costs typically 2–6% of the loan balance (easily $5,000–$12,000). In exchange, you can capture a lower market rate and change the term or loan type.
One more option worth knowing: a plain principal curtailment — the same lump-sum extra payment without recasting — saves the exact same total interest as a recast. Recast = lower payment, same payoff date. Curtailment = same payment, earlier payoff. Pick whichever matters more.
The numbers: $50,000 lump sum on a $350,000 loan
Assume a $350,000 balance at 6.5% with 25 years (300 months) remaining: current payment $2,363/month, remaining interest about $358,968. You receive a $50,000 bonus. Here is what each path produces:
| Do nothing | Recast ($50K lump) | Refi to 5.875%, 30 yr | Refi to 5.75%, 25 yr | |
|---|---|---|---|---|
| New balance | $350,000 | $300,000 | $300,000 | $300,000 |
| Monthly P&I | $2,363 | $2,026 | $1,775 | $1,887 |
| Monthly savings | — | $338 | $589 | $476 |
| Upfront cost | $0 | ~$250 fee | ~$6,000 closing | ~$6,000 closing |
| Total remaining interest | $358,968 | $307,686 | $338,861 | $266,196 |
Three takeaways. First, the recast saves $51,281 in interest for about $250 out of pocket — the payment drops roughly in proportion to the balance cut. Second, the 30-year refinance looks best on monthly payment ($589 lower) but actually costs $31,175 more in total interest than the recast — because it restarts the clock at 30 years on a loan that had only 25 years left. Third, refinancing into the same 25-year term at 5.75% beats the recast by $41,491 in interest, paying for its $6,000 closing costs in about 13 months. Run your own numbers through our Mortgage Calculator.
When a recast is the right call
- Your rate is already good. If you locked in a low rate years ago and today’s rates are the same or higher, refinancing buys you nothing — a recast captures your lump sum’s benefit without touching the rate.
- You want cash-flow relief, cheaply. Breakeven is nearly instant: $250 against $338/month in savings.
- You can’t or won’t refinance. Recasts skip the credit check and appraisal, so they’re available even if your credit has slipped or your home hasn’t been appraised recently.
- You want a safety net. The lower required payment is permanent — protection if income ever drops.
Check eligibility first: most conventional loans allow recasts, but FHA, VA, and USDA loans generally do not, and some servicers cap how often you can recast. Call your servicer to confirm the fee, minimum principal payment, and any limits.
When refinancing wins instead
- Market rates are at least ~0.75–1 point below your rate. That’s roughly where interest savings start outweighing closing costs. Divide closing costs by monthly savings for your breakeven in months — only refinance if you’ll keep the loan well past breakeven.
- You want to change the term — e.g., switching from a 30-year to a 15-year (a recast can never change the term or rate).
- You want to switch loan types, such as moving from an adjustable-rate mortgage to a fixed rate.
Watch the term-reset trap: refinancing for a lower payment at a similar rate restarts amortization — in our example it cost more total interest despite the lower payment. Compare refinance offers at your remaining term, not 30 years. The Loan Amortization Calculator makes this easy.
The hybrid move: recast, then keep overpaying
The strongest play with a lump sum, when your rate is already decent:
- Recast — lock in the lower required payment (permanent safety net, ~$250 cost).
- Keep paying your old, higher amount voluntarily — the difference goes straight to principal.
You get the lower obligation and a shorter payoff, and the recast fee is the only cost. This suits variable incomes: a lower floor in bad months, faster payoff in good ones. Confirm your servicer applies extras to principal — specify “principal only.”
Frequently asked questions
How much does it cost to recast a mortgage?
Typically a flat $150–$500 administrative fee — often around $250 — plus a lump-sum principal payment that most servicers require as a minimum of $5,000–$10,000. No appraisal, no credit check: a recast costs a fraction of a refinance.
Does a mortgage recast lower my interest rate or shorten my term?
A recast changes neither your rate nor your maturity date — it only recalculates your monthly payment so the reduced balance pays off evenly over your remaining original schedule. For a lower rate or a different term, you need a refinance.
Can I recast an FHA, VA, or USDA loan?
Generally no — those government-backed loan programs typically do not allow recasts. Recasting is most commonly available on conventional loans, though policies vary by servicer. Always call your servicer to confirm before planning around it.
Is it better to recast or just make a large extra principal payment?
Both save the exact same total interest for the same lump sum — only what changes differs. A recast lowers your required payment (cash-flow relief, same payoff date); a plain extra payment keeps the payment the same and shortens the term. If monthly flexibility matters, recast. If you want the loan gone sooner with zero fees, just pay extra.
Reviewed October 2026. Examples computed with the standard US mortgage amortization formula; rates and costs shown are illustrative, not current market quotes. This article is educational content, not financial advice.