Mortgage Recast vs Refinance: Which Actually Cuts Your Payment?
Both moves lower your monthly mortgage payment, and both save interest. They do it in different ways: a recash of cash into your current loan, or a brand-new loan at a different rate. This page runs the same mortgage through both paths, with a worked example five years in, and shows exactly what each one costs and saves. The numbers below are computed from standard amortization math, not estimates.
Recast vs Refinance at a Glance
| Factor | Recast (cash-in) | Refinance |
|---|---|---|
| What changes | Balance goes down; rate and contract stay the same | New loan: new rate, new term, new contract |
| Interest rate | Unchanged | Can come down (or up) |
| Closing cost | None, or a small service fee | Yes, typically a few thousand dollars |
| Credit check | Usually none | Yes, a new application |
| Lowers payment by | Re-amortizing the smaller balance | New rate and/or longer term |
| Saves total interest by | Less, rate never drops | More, when the new rate is clearly lower |
| Best when | You have cash but no lower rate to take, or you cannot refinance | A market rate is well below your current rate and you will stay long enough to recoup the cost |
The one-line difference: a recast lowers your payment; a refinance lowers your rate. Lowering the payment is cheap and fast. Lowering the rate is worth more over a long term but costs a closing fee to unlock.
How Each Move Works
A recast takes the lump of cash you are injecting and applies it straight to your remaining principal. Your lender redraws the amortization table so that smaller balance is paid off over the months you have left, at your original rate. There is no new loan, no credit check, and usually no closing cost. The trade-off is that your rate is frozen where it is: if your current rate is already low, the savings come only from the smaller balance, not from a cheaper rate.
A refinance pays off your current loan entirely and replaces it with a new one at a new rate and a new term. Because the rate itself can fall, a refinance saves more interest over a long remaining term than a recast can. The price is the closing cost, which is a real sum you must earn back in monthly savings, and the credit check and paperwork of a fresh application.
Recast: add cash to principal → redraw schedule at the same rate → lower payment
Refinance: take a new loan at a new rate → pay off the old one → possibly lower rate and payment, at a closing cost
Worked Example: Five Years Into a $300,000 Loan
Start with a common loan: $300,000 at 4.50% over 30 years, a fixed monthly payment of $1,520.06. After five years of on-time payments, the remaining balance is $273,473.75 and 300 payments are left. Now run that same borrower through each path, and compare both against simply doing nothing. The refinance rate below is an illustrative number used only for the arithmetic; it is not a quote, and it is not the current market rate.
| Path | Rate | Term | New payment |
|---|---|---|---|
| Do nothing | 4.50% | 25 years | $1,520.06 |
| Recast $30,000 in | 4.50% | 25 years | $1,353.31 |
| Refi to illustrative 3.25% | 3.25% | 25 years | $1,332.68 |
The interest math across the remaining 300 payments:
| Path | Remaining interest | Interest saved vs doing nothing |
|---|---|---|
| Do nothing | $182,543.03 | — |
| Recast $30,000 in | $162,518.10 | $20,024.93 |
| Refi to illustrative 3.25% | $126,330.84 | $56,212.19 |
Read the two side by side. The recast cost nothing to start and trimmed $20,024.93 of interest by shrinking the balance; the payment fell $166.75. The refinance, at a lower rate, trimmed $56,212.19 — roughly three times the recast's saving — and pushed the payment down $187.38 a month. But the refinance carries a closing cost. At $5,000, that cost pays back in about 26.7 months of the $187.37 saving. Stay in the home longer than that and the refinance wins on net; leave before it and the recast was the cheaper decision.
Who Should Recast
- You have a real lump of cash — a bonus, a sale, an inheritance, or a large prepayment — and you want that cash to lower your payment instead of sitting in a checking account.
- Your current rate is already low, so there is no cheaper rate to chase. A refinance would just restart a similar rate at a closing cost; a recast drops the payment for free.
- You do not qualify to refinance: thin equity, a recent move, a changed credit picture, or a loan type the new lender will not take. A recast usually needs none of those.
- You plan to sell or move before a refinance's closing cost pays back. The recast has no cost to recoup, so it keeps saving from day one.
Who Should Refinance
- The available market rate is well below your current one — in the example the gap between 4.50% and the illustrative 3.25% is what drives the extra $36,000 of interest saved.
- You will keep the loan for years, long enough for the closing cost to be repaid many times over by the lower payment.
- You want to change the loan itself: switch term, switch a fixed rate to something else, or pull out equity. Those are refinance moves, not recasts.
- You have the equity and credit to clear a fresh application. The refinance pays the most interest when the rate gap is wide and the horizon is long.
Doing Both: The Combined Move
The two moves are not either-or. A borrower who can refinance and has cash on hand can do both at once: take the new lower rate, and inject cash into that new loan so its amortization redraws again. The lower rate cuts the interest bill, and the cash-in then cuts the payment on an already-cheaper balance. The order matters for the math — the rate reduction compounds the effect of the cash-in. For any prepayment on the mortgage side of your budget, the Biweekly Mortgage Calculator and the Extra Payment Calculator size the payment effect; this page sizes the recast-versus-refi decision that stands behind them.
FAQ
What is a mortgage recast?
A mortgage recast is a one-time injection of extra principal into your existing loan. The interest rate and the original contract stay the same; the lender simply redraws your amortization schedule so the remaining balance is spread over the remaining months. Your monthly payment drops, and you pay less total interest, but the rate itself does not change.
Which saves more: recast or refinance?
A refinance to a meaningfully lower rate saves more total interest over the life of the loan, because the rate itself comes down. A recast saves interest with zero new debt and no closing cost, and it works even when you cannot refinance. In the worked example on this page, refinancing to an illustrative 3.25% cut the remaining interest by $56,212, while a $30,000 cash-in recast at the same rate cut it by $20,025.
How much do I need to recast a mortgage?
Lenders usually require a minimum cash-in, often around 5 percent of the outstanding balance, and the larger the injection the bigger the payment drop. In the example on this page the balance was $273,474 and the injection was $30,000, about 11 percent of the balance, which lowered the payment from $1,520.06 to $1,353.31.
Does a recast lower my interest rate?
No. A recast keeps your current rate; it only lowers the monthly payment by spreading the reduced balance over the remaining term. If the goal is a lower rate, that is what a refinance does, not a recast.
When should I refinance instead of recast?
Refinance when the available market rate is far enough below your current rate that the monthly savings repay the closing cost in a time you will stay in the home. With a $5,000 closing cost and a $187.37 monthly saving in the example, the payback is about 27 months. If you will sell or move before that point, the cost does not pay back and a recast is the cheaper move.
Can I recast any type of loan?
It depends on the loan and the lender. Recasting is most commonly offered on conventional, fixed-rate loans, and some lenders extend it to certain other loan types; jumbo and some government loans are often not eligible. Ask your current lender directly whether your loan supports a cash-in recast before planning around it.
Keep Comparing
The prepayment question on the mortgage side continues here: see Biweekly vs Extra Payments for the two main payment patterns, or run your own numbers in the Biweekly Mortgage Calculator and the Extra Payment Calculator. On the debt side, the same compare-two-paths logic is applied to paying off multiple debts in Debt Snowball vs Avalanche. The AmortWise homepage lists every tool on the site.