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The short answer
A recast (re-amortization) keeps your existing loan — same rate, same term — but recalculates the monthly payment after a large lump-sum principal payment, for a fee of roughly $250–$500. A refinance replaces the loan entirely with a new rate and term, costing $3,000–$20,000+ in closing costs. Recast when you're happy with your rate and just want a lower payment; refinance when the rate itself needs to change.
How a recast works
- You make a large lump-sum payment toward principal — lenders often require $10,000+ (some set higher minimums).
- The lender re-amortizes the remaining balance over your remaining term at your current rate.
- Your monthly payment drops. Everything else — rate, term, lender — stays the same.
- You pay a small administrative fee (typically $250–$500) and sign a recast agreement. No appraisal, no underwriting, no new loan.
Example: $400,000 balance at 7% with 25 years left → payment ~$2,827/month. Pay $80,000 lump sum, recast the $320,000 over 25 years at 7% → payment ~$2,262/month. Saves ~$565/month for a few hundred dollars in fees.
Not all loans qualify: FHA, VA, and USDA loans generally can't be recast, and some servicers don't offer it. Conventional conforming loans usually do — but ask your servicer, since investor rules vary.
How a refinance compares
| Recast | Refinance | |
|---|---|---|
| Rate | Unchanged | New (hopefully lower) |
| Term | Unchanged (remaining) | New (you choose) |
| Cost | ~$250–$500 fee | ~2–5% of loan in closing costs |
| Underwriting | None | Full (income, appraisal, credit) |
| Timeline | Weeks | 30–60 days typically |
| Payment change | Lower (same rate, smaller balance) | Depends on new rate/term |
| Loan types | Conventional mostly; no FHA/VA/USDA | All types |
When recasting wins
- You like your rate. If you locked 6.5% and rates are now 7%, refinancing would raise your rate — recast instead.
- You received a windfall. Bonus, inheritance, sale of another asset — a lump sum that would otherwise sit in savings at 4%.
- You want a lower payment without the hassle. No appraisal, no income docs, no 60-day process.
- You're close to retirement and want the payment down but don't need a new 30-year term.
When refinancing wins
- Rates dropped meaningfully. A 1+ point rate improvement usually outweighs refinance costs if you'll stay put.
- You want a different term. Only a refinance can move you from 30 years to 15. See refinance to shorten the term.
- You need cash out. Recasts only reduce the balance; cash-out requires a refinance (or HELOC).
- Your loan can't be recast. FHA/VA/USDA borrowers must refinance (often into conventional) to reset the payment.
The math that decides it
Compare the recast fee (~$500) against refinance closing costs (~$8,000–$15,000) relative to what each saves you monthly. If your rate is already competitive, the recast's tiny fee breaks even almost immediately — month one. A refinance needs years of rate savings to recover its costs.
One nuance: a recast doesn't shorten your term or reduce total interest as aggressively as extra payments would. If your goal is paying less interest rather than a lower payment, skip both and just make principal-only extra payments — free, flexible, same effect on interest.
Common mistakes
- Assuming your servicer offers recasting. Call and ask before planning around it — policies differ.
- Recasting when a refinance would cut your rate. If rates fell 1.5 points, you're leaving money on the table.
- Paying the lump sum without recasting. Extra principal without a recast shortens the term but doesn't lower the payment. You must request the recast.
- Recasting an FHA/VA loan. Not allowed — you'll waste time. Refinance instead.
Methodology and limitations
Recast fees, minimums, and eligibility reflect typical conventional-loan servicer policies; your servicer's terms govern. Payment figures are illustrative at 7% over 300 remaining months. Refinance cost ranges reflect 2026 closing-cost norms. As of October 2026.
Reviewed by the LoanMate.ai editorial team.
Primary sources
- Consumer Financial Protection Bureau (CFPB): mortgage servicing and payment-recast explanations
- Fannie Mae: servicing guidelines on re-amortization
- Federal Housing Finance Agency (FHFA): conforming loan program rules
Next action
Model your recast payment →, compare refinance quotes if rates have fallen since you locked, and check current mortgage rates to see the gap.