Recast vs refinance: which should I do?
A recast keeps your existing loan — same rate, same payoff date — and re-amortizes the payment after you make a lump-sum principal payment, for a small servicer fee typically in the hundreds of dollars. A refinance replaces the loan entirely at today’s rates with full closing costs. The decision rule is your rate versus the market: if your rate is below what you could get today, recasting lowers your payment while protecting that rate; if today’s rates are meaningfully below yours, the refinance does more work. Many borrowers with windfalls and low locked rates want a recast and are only ever offered a refinance — servicers rarely volunteer the cheaper option.
Last reviewed 2026-08-24
What a recast actually does
You pay a lump sum toward principal — servicers commonly require a minimum, often in the low thousands — and the servicer recalculates your required monthly payment from the new, lower balance over the loan’s remaining term. Rate unchanged, payoff date unchanged, no appraisal, no credit pull, no underwriting: just a smaller balance amortized over the same schedule, for a processing fee that is typically a few hundred dollars rather than thousands in closing costs.
The eligibility traps nobody mentions
Recasting is a servicer accommodation, not a right. Conventional loans generally can be recast; FHA, VA, and USDA loans generally cannot. Some servicers impose waiting periods, minimum lump sums, or simply decline. The first call is to your servicer with one question — “do you recast, and on what terms?” — before any planning around the answer.
The decision rule, stated plainly
Compare your current rate with today’s market. Rate below market: recast — a refinance would trade your advantaged rate away and charge closing costs for the privilege. Rate above market: run the refinance break-even math, and note that the lump sum you were going to recast with can shrink the refinanced balance instead. Rate near market: the recast usually wins on cost, since a few hundred dollars beats full closing costs for a similar payment outcome. Refinance break-even calculator
What a recast cannot do
It cannot lower your rate, shorten your term, remove PMI by itself, or pull cash out. It does exactly one thing: lower the required payment by amortizing a smaller balance over the existing schedule. Borrowers wanting a faster payoff should instead make the lump-sum payment without recasting — the balance drops the same either way, but the unchanged higher payment then shortens the loan.
Using both
The combination move: refinance when rates warrant it, then recast later when a windfall arrives — a bonus, an inheritance, proceeds from a sale. Some servicers will recast a loan repeatedly. A refinance is a market decision; a recast is a cash-flow decision; nothing requires you to choose one forever.
Ralo is an automated mortgage broker — not a lender — that compares multiple lenders from one application, earns a thin commission, and shows rate, APR, and fees upfront. Rates shown anywhere on this site are illustrative examples, not a loan approval, rate lock, or commitment. Available where licensed: California, Colorado, and Texas.