Mortgage Recast vs. Refinance 2026: Which Lowers Your Payment More?
You came into some money — a bonus, an inheritance, the proceeds from selling another property — and you want to put it toward your mortgage to lower your monthly payment. You have two very different tools for the job: a recast and a refinance. They both reduce your payment, but they work in opposite ways and cost wildly different amounts. Choosing the wrong one can cost you thousands. This guide breaks down exactly how each works, what they cost in 2026, and how to decide.
What is a mortgage recast?
A mortgage recast (also called reamortization) keeps your existing loan exactly as it is — same lender, same interest rate, same payoff date — but recalculates your monthly payment around a lower principal balance after you make a large lump-sum payment. You apply, say, $50,000 to principal, pay a small fee, and your servicer re-runs the amortization schedule over your remaining term. The result is a permanently lower monthly payment.
The key point: a recast does not touch your interest rate or your term. If you have a 4% rate with 24 years left, you still have a 4% rate with 24 years left — just on a smaller balance.
What is a refinance?
A refinance replaces your entire loan with a brand-new one. You go through underwriting again — credit check, appraisal, income verification — and pay closing costs of roughly 2%–5% of the balance. In exchange, you can change your interest rate, your term (e.g., 30 years back down to 15), or pull out equity as cash. A refinance is the only one of the two options that can lower your rate. For a full walkthrough of the break-even math, see our mortgage refinance break-even guide.
Recast vs. refinance: side-by-side
| Feature | Recast | Refinance |
|---|---|---|
| Cost | $150–$500 flat fee | 2%–5% of balance ($4,000–$10,000+) |
| Changes interest rate? | No | Yes |
| Changes loan term? | No | Yes |
| Requires lump-sum payment? | Yes (typically $5,000+ min) | No |
| Credit check / appraisal? | No | Yes |
| Lowers monthly payment? | Yes | Yes (if rate/term favorable) |
| Loan types eligible | Conventional only (usually) | Most loan types |
| Processing time | 2–4 weeks | 30–45 days |
The cost gap is enormous
This is the single biggest practical difference. A recast is an administrative task for your servicer, so it carries only a small flat fee — commonly $150 to $500 — with no appraisal, no credit pull, and no closing costs. A refinance is a full loan origination, so on a $300,000 balance you should expect $6,000–$15,000 in closing costs. Those costs must be recouped through monthly savings before a refinance actually pays off.
Worked example: $60,000 lump sum
Suppose you have a 30-year loan originated at $400,000 at 5.0%, and after 5 years your balance is about $366,000 with 25 years remaining. Your principal-and-interest payment is roughly $2,147/month. You inherit $60,000 and want to lower your payment.
Option A — Recast
You apply $60,000 to principal (new balance ~$306,000), pay a $300 recast fee, and your servicer reamortizes at your existing 5.0% rate over the remaining 25 years. Your new payment drops to about $1,795/month — a savings of roughly $352/month. Your rate and payoff date are unchanged. Total cost to you: $300.
Option B — Refinance
If 2026 market rates are higher than your 5.0% (say 6.5%), refinancing the same $306,000 balance into a new 30-year loan would raise your rate and reset the clock — your payment might be similar or higher, and you'd pay ~$8,000 in closing costs. In this scenario, the recast clearly wins. But if market rates had fallen to 4.0%, a refinance could lower both your rate and payment enough to justify the closing costs. The direction of rates versus your current rate is the deciding factor.
When a recast is the better choice
- Your current rate is at or below market. If you locked a low rate, keep it. A recast lets you lower your payment without surrendering that rate.
- You have a lump sum. Recasting requires a meaningful principal payment (servicers often set a $5,000–$10,000 minimum plus a minimum resulting balance).
- You want lower payments, not a faster payoff. Recasting improves monthly cash flow while keeping your original payoff date.
- You want to avoid paperwork. No credit check, no appraisal, no income docs.
When a refinance is the better choice
- Market rates are meaningfully lower than your rate. Only a refinance can capture a lower rate — generally worth it when you can drop roughly 0.75% or more and will stay long enough to hit break-even.
- You want to change your term. Moving from a 30-year to a 15-year loan to save on lifetime interest requires a refinance. Compare the tradeoffs in our 15-year vs. 30-year mortgage guide.
- You need cash from your equity. A cash-out refinance (or a HELOC) is the tool for accessing equity; a recast cannot do this.
- You want to drop mortgage insurance. If your home value has risen, refinancing into a loan below 80% LTV can eliminate PMI.
Recast eligibility and restrictions
Recasting is not universally available. Key constraints to confirm with your servicer before sending money:
- Loan type: Conventional loans are typically eligible. FHA, VA, and USDA loans usually are not. Jumbo loans vary by servicer.
- Minimum lump sum: Often $5,000 or more, sometimes expressed as a minimum principal reduction (e.g., 10%).
- Payment history: Most servicers require you to be current and to have made a minimum number of on-time payments.
- One-time limits: Some servicers limit how often you can recast over the life of the loan.
How to recast your mortgage: step by step
- Call your loan servicer. Confirm your loan is eligible and ask for the exact fee, minimum lump sum, and required forms.
- Confirm the math first. Ask for the projected new payment, or model it yourself by amortizing your remaining balance minus the lump sum at your existing rate over the remaining term.
- Make the lump-sum principal payment. Clearly designate it as "principal only" so it isn't applied to future payments.
- Submit the recast request and fee. The servicer reamortizes and issues a new payment schedule, usually within 2–4 weeks.
- Verify your new statement. Confirm the new payment, unchanged rate, and unchanged payoff date on your next statement.
Frequently asked questions
Is it better to recast or refinance a mortgage?
Recast if you are happy with your current interest rate, have a lump sum, and want a lower payment for a small fee. Refinance if market rates are meaningfully lower than your rate — only a refinance can change your rate. If your rate is already low, refinancing into today's higher rates would raise your costs, making a recast the smarter move.
Does a mortgage recast lower your interest rate?
No. A recast keeps your existing rate and remaining term unchanged. It only reamortizes the loan around a lower balance after a lump-sum payment, which lowers the monthly payment. To change your rate, you must refinance.
How much does it cost to recast a mortgage?
Typically a flat fee of $150 to $500 — no appraisal, no credit check, no closing costs. That's far cheaper than a refinance, which usually runs 2%–5% of the loan balance.
Can you recast an FHA or VA loan?
Generally no. Recasting is usually limited to conventional loans. FHA, VA, and USDA loans typically cannot be recast, and jumbo eligibility varies by servicer. Always confirm before making a lump-sum payment.