You have a lump sum of cash and a mortgage. You want a lower monthly payment. Two options come up — a mortgage recast and a refinance. They sound similar, they both involve your mortgage, and they both promise to save you money. But they work completely differently and are right for very different situations.
Here's the honest breakdown of both — what they cost, what they save, and exactly which one makes sense for you.
"A recast keeps your interest rate and just re-calculates your payment. A refinance replaces your entire loan with a new one at a new rate."
That one difference changes almost everything about the cost, the process, the timeline, and who each option is right for.
A mortgage recast (also called re-amortization) lets you make a large lump sum payment toward your principal balance, and then your lender recalculates your monthly payment based on the new, lower balance — keeping your existing interest rate and loan term intact.
A mortgage refinance replaces your existing loan with a brand new loan — new interest rate, new term, new closing costs, and a full underwriting process. You essentially take out a new mortgage to pay off your old one.
| Feature | Recast | Refinance |
|---|---|---|
| Changes interest rate | ✕ No | ✓ Yes |
| Requires lump sum payment | ✓ Yes ($10K+ typically) | ✕ No |
| Closing costs | $150–$500 | 2–3% of loan (~$6,000–$9,000) |
| Credit check required | ✕ No | ✓ Yes |
| Appraisal required | ✕ No | ✓ Usually |
| Time to complete | 2–4 weeks | 30–60 days |
| Loan term changes | ✕ No | ✓ Yes (resets) |
| Available for FHA/VA loans | ✕ No | ✓ Yes |
| Available for conventional loans | ✓ Yes (most lenders) | ✓ Yes |
Let's say you have a $350,000 mortgage at 3.5% (locked in during 2021), 25 years remaining, and you just received a $50,000 inheritance.
In this scenario — refinancing makes zero sense. You locked in 3.5% in 2021. Current rates at 6.49% would make your payment jump by $458/month and cost you $7,000–$10,500 in closing costs. The recast is the clear winner here.
Yes — and it can be a smart strategy. If you refinance to a conventional loan first (to escape FHA or VA restrictions, or to get a better rate), you can then recast the new conventional loan with a lump sum payment to further reduce your monthly payment. Some homeowners use this two-step approach to maximize savings.
Most lenders require a minimum lump sum of $5,000-$10,000 to recast, though the exact threshold varies. Check with your specific servicer — some set the minimum higher.
No. Since there's no credit check involved, a recast has zero impact on your credit score. This is one of its biggest advantages over refinancing.
Most lenders allow it, though some limit how often you can recast — often once per year or once total, depending on their policy. Ask your servicer before assuming you can do it repeatedly.
They solve different problems. Extra principal payments (without recasting) shorten your loan term but keep your required monthly payment the same. Recasting lowers your required monthly payment immediately but keeps your original payoff date. If your goal is lower monthly cash flow now, recast. If your goal is paying off the loan faster, extra payments alone work fine.
Conventional loans are generally recast-eligible at most lenders. FHA, VA, and USDA loans are not — this is a HUD-level restriction, not a lender choice.
Typically 2-4 weeks from the time you submit your lump sum and request, though this varies by servicer. There's no underwriting delay like a refinance, so it moves considerably faster.
Not usually. If current rates are meaningfully below your existing rate, refinancing captures that rate improvement across your entire remaining balance — a recast doesn't touch your interest rate at all. Recasting only makes sense when your existing rate is already good.
Your escrow account for taxes and insurance is separate from the recast calculation, though your servicer will typically recalculate your total payment (principal, interest, taxes, insurance) after the recast to reflect the new lower principal and interest portion.
Not simultaneously, but you can do them sequentially — refinance first, then recast the new loan later once you have a lump sum available. This two-step approach is common for homeowners moving from FHA to conventional financing who also want to apply a windfall.