How it works
A mortgage recast is a re-amortization: you make a large principal payment, and the lender recalculates your monthly payment on the new, smaller balance across the REMAINING term at your EXISTING rate — usually for an administrative fee near $250, with no credit check, appraisal or new loan. Refinancing replaces the loan entirely: new rate, new term, new closing costs commonly running thousands. The two paths solve different problems, and choosing wrong costs real money. Recasting wins when your rate is already good relative to the market — you keep the below-market rate and simply shrink the balance it applies to. Refinancing wins only when the market rate undercuts yours by enough to overcome closing costs within your horizon. This calculator prices both honestly: it recomputes each path's payment on the same post-lump balance over the same remaining term, adds the true fees to each side, and races them across five years of interest. The defaults tell the classic story — $40,000 onto a 5.25% loan drops the payment to about $1,856 for a quarter-thousand in fees, while refinancing at 6.125% produces a HIGHER payment despite the same principal, plus $4,800 upfront. Flip the rates and the verdict flips with them; the math handles both worlds identically.
Formula
Recast payment = payment(balance − lump, current rate, remaining term) + ~$250 fee | Refi payment = payment(balance − lump, market rate, new term) + closing costs
Tips
- Never recast when your rate is above market — refinance shopping comes first.
- Confirm your loan is recast-eligible: many government-backed loans are not.
- Keep paying the old payment after a recast and it becomes a prepayment machine.
- Compare the $250 recast fee against $5,000 closing costs before assuming parity.
- Refis reset the amortization clock; recasts never extend your payoff date.
Frequently asked questions
- What is the difference between a recast and a refinance?
- A recast re-amortizes your existing loan after a lump-sum payment — same rate, same payoff date, roughly a $250 fee, no underwriting. A refinance creates an entirely new loan at market rates with full closing costs, often $4,800 here. Recasting adjusts the payment; refinancing reprices the whole debt.
- How much does a mortgage recast cost?
- Typically $150–$500 in administrative fees — call it $250 at most major servicers — versus thousands in closing costs for a refinance. That asymmetry decides most contests when your existing rate already matches or beats the market: paying $250 to keep 5.25% beats paying $4,800 to move to 6.125%.
- When does refinancing beat recasting?
- When market rates undercut yours by enough to repay closing costs inside your holding period. Dropping from 7.5% to 6.1% on a $300,000 balance saves roughly $260 monthly — recovering $5,000 of costs in about 19 months. Below-market incumbents like the default 5.25% here flip the verdict toward recasting immediately.
- Does a recast lower my interest rate?
- No — the rate stays exactly as contracted. Recasting shrinks the BALANCE the rate applies to, cutting the payment proportionally. Interest saved flows purely from carrying less principal for the remaining years, not from better pricing; only a refinance changes the rate itself.
- How much lump sum do I need to recast?
- Servicers set minimums, commonly $5,000–$10,000 or around 10% of the balance. The effect scales linearly: $40,000 off a $340,000, 5.25%, 24-year loan trims the payment by roughly $230 a month. Bigger sums move it further; tiny ones rarely clear the administrative minimum at all.