Mortgage Recast vs Refinance: Which Saves More Money?
A mortgage recast re-amortizes your loan after a lump-sum principal payment, lowering your payment without a new loan. Refinancing replaces the loan entirely. Learn when each strategy wins — and when neither makes sense.
What Is a Mortgage Recast?
A mortgage recast (also called re-amortization) is the process of making a large principal-reduction payment and having your lender recalculate your monthly payment based on the new, lower balance — while keeping the same interest rate and remaining loan term. The mechanics: You pay $X as a lump sum to principal. The servicer takes your new reduced
Recast vs. Refinance: The Core Trade-offs
The decision between recasting and refinancing centers on one question: is your current interest rate competitive with market rates? If your current rate is within 0.25%–0.50% of market rates, recasting almost always wins. You avoid $4,000–$8,000 in closing costs, the process takes 30–45 days vs. 60–90 days for a refinance, and there's no credit ch
How Much Can a Recast Save? Worked Scenarios
The payment reduction from a recast depends on the lump sum size, the current balance, the rate, and the remaining term. Larger lump sums on higher-rate loans produce larger savings. Scenario A — $30,000 recast on $280,000 balance, 7%, 22 years remaining: Current payment: $2,133/month New balance: $250,000 Recasted payment: $1,903/month Monthly sav
When Refinancing Is Still Better Than Recasting
Even with the recast's cost advantage, refinancing wins in specific scenarios. Large rate drop scenario: You have a 7.75% rate from a 2023 origination. Market rates fall to 6.5% in 2025. On a $350,000 balance with 27 years remaining, the rate difference saves $264/month without any lump sum required. At $6,000 in closing costs, break-even is 23 mon
Frequently Asked Questions
What is a mortgage recast?
A mortgage recast (or re-amortization) is when you make a large lump-sum principal payment and ask your lender to recalculate your monthly payment based on the new lower balance, keeping the same interest rate and remaining loan term. The result is a lower monthly payment without
Is mortgage recasting worth it?
Yes — in most cases where you have a lump sum and your current rate is within 0.5% of market rates, recasting is worth it. The fee ($150–$500) is recovered in days or weeks from the payment reduction. The decision not to recast is usually justified only when rates have dropped en
Can I recast an FHA loan?
No. FHA loans are not eligible for recasting. VA loans are also generally ineligible. Only conventional loans (Fannie Mae/Freddie Mac conforming loans) are recastable as a standard feature. Some jumbo loans may be recastable depending on the servicer's policy. Always confirm elig
How much do you need to recast a mortgage?
Most servicers require a minimum lump-sum payment of $5,000–$10,000 to qualify for a recast. There's no maximum — you can pay any amount above the minimum. Larger payments produce larger payment reductions. The servicer will confirm their specific minimum when you call to inquire
Does a mortgage recast affect your credit?
No. Unlike refinancing, which involves a new loan application and a hard credit inquiry, a recast is a modification to your existing loan with no credit check. Your credit score is unaffected. The loan characteristics (age, rate, servicer) also remain unchanged.
Should I recast or invest the money instead?
Compare the guaranteed return of the recast (your mortgage interest rate) against your expected investment return. At a 7% mortgage rate, a recast provides a risk-free 7% return. Long-term equity investment has a higher expected return (~10% nominal historically) but with volatil