Mortgage Recast vs Refinance: What's the Real Difference?
A mortgage recast (also called a "re-amortization") lets you apply a lump-sum payment toward your principal balance while keeping your original interest rate, loan term, and closing costs unchanged. The lender simply re-calculates a lower monthly payment based on the reduced balance over the remaining term.
Recast Keeps Your Rate
Unlike refinancing, a recast does not require a new credit check, new appraisal, or new closing disclosure. It typically only costs a small $150–$300 processing fee, making it far cheaper than a full refinance.
Not All Lenders & Loans Qualify
Most conventional loans allow recasting, but FHA, VA, and USDA loans generally do not. Check with your loan servicer to confirm eligibility and any minimum lump-sum requirement (often $5,000–$10,000+).
Recast Payment Formula
New Payment = Amortize(Balance − Lump Sum, Same Rate, Same Remaining Term)
Example: A $50,000 lump sum on a $300,000 balance at 6.5% with 25 years remaining meaningfully lowers the monthly P&I payment while the loan payoff date stays exactly the same.
Recast vs Extra Principal Payments
Making extra principal payments without recasting shortens your loan term but keeps the monthly payment the same. Recasting instead lowers the monthly payment immediately — ideal for homeowners who want reduced fixed monthly obligations rather than an earlier payoff date.
