A bonus. An inheritance. Cash from a sale. However the money arrived, you have two ways to turn it into a lower payment. People mix these two up all the time. But the math behind them is not close.
What each one actually does
A recast keeps your loan, your rate, and your term just as they are. You pay a big sum off the balance. Then your lender spreads what is left over the same years. Your monthly bill falls. Not every lender offers a recast, and FHA, VA and USDA loans often cannot be recast. A refinance replaces your loan entirely with a new one, at a new rate, new term, and new closing costs.
Side-by-side
| Recast | Refinance | |
|---|---|---|
| Changes your rate? | No | Yes |
| Changes your term? | No | Yes, if you choose |
| Requires a credit check? | Usually no | Yes |
| Typical cost | $150–$500 flat fee | 2–5% of balance |
| Requires a lump sum? | Yes | No |
| Best when... | Your rate is already good | Current rates beat yours |
If your rate is already at or below current market rates, a recast is often the cheaper route. You get a lower bill for a few hundred dollars. There is no rate risk, and no stack of forms. But if current rates are well below yours, a new loan may come out ahead. That can hold even after the fees, once you do the break even math.
When a recast makes more sense
- Your rate is already competitive. A new loan gains you nothing on rate. So paying fees for the rate you already have may not make sense.
- You want to avoid a new credit pull and underwritingThe lender checking whether it will really lend to you.Click to open the full glossary.. Recasting is largely an administrative request, not a new loan approval.
- You have a lump sum but don't need cash out. Not after cash? Then a recast gets you the lower bill with none of the work of a full new loan.
When a refinance makes more sense
- Current rates are meaningfully below yours. The saving comes from the rate change. Only a new loan can get you that.
- You want to change your term. A recast cannot change how long your loan runs. Only a new loan can.
- You need cash out. A cash out loan lets you take money from the home. A recast asks you to put money in.
"If your rate is already competitive, a recastPaying a lump sum, then having your payment recalculated.Click to open the full glossary. fee of a few hundred dollars often costs far less than a refinance's 2–5% closing costsThe fees you pay to set the loan up and transfer the home.Click to open the full glossary.."
Before deciding, run your numbers through our free refinance break-even calculator. It uses the latest 30-year average rate, updated each business day. If that does not beat your rate, a recast may be the better fit. Only a lender can quote your real rate.
Either way, it comes down to how your rate compares with the market. We update average rates every business day. With Pro, we email you when the average reaches the target rate you set and the math shows a saving.
Know your break-even before you decide
Our free refinance tracker compares your loan with the latest average rates.
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