Mortgage WellMortgage recast vs. refinance
Both moves reduce your required monthly payment. The mechanics, costs, and side effects are completely different — and choosing the wrong one can cost thousands.
What a recast does
You make a lump-sum principal payment, and the servicer re-amortizes the remaining balance over your original rate and remaining term. The rate doesn't change. The term doesn't change. The balance is smaller, so the new scheduled payment is smaller. Servicers typically charge a flat $150–$500 fee.
What a refinance does
You take out a new mortgage that pays off the old one. The new loan has its own rate, term, and closing costs ($3,000–$10,000+ typically). You can get a different rate, switch loan types (ARM to fixed), or take cash out — but you reset the payoff clock unless you choose a matching term.
Side-by-side
| Dimension | Recast | Refinance |
|---|---|---|
| Changes the rate | No | Yes |
| Resets the term | No | Possibly (depends on new term) |
| Typical cost | $150–$500 | $3,000–$10,000+ |
| Requires lump sum | Yes (usually $10k+) | No |
| Credit check / appraisal | Usually no | Yes |
| Available on FHA / VA / USDA | Usually no | Yes |
Use recast when
- You have a large lump sum and a favorable existing rate.
- You want lower payments without paying closing costs.
- Your servicer allows recasts on your loan type.
Use refinance when
- Rates have dropped meaningfully since you took out your loan.
- You want to change loan type (ARM to fixed, jumbo to conforming).
- You want to take cash out of equity.
- You don't have a lump sum but want a different rate or term.
Frequently asked
- Can I recast and refinance?
- Sequentially, yes. But after a refinance you have a brand-new loan, so any recast eligibility resets to that loan's servicer.
- Is a recast taxable?
- No. You're paying down your own debt; no taxable event. Refinancing isn't a taxable event either, but cash-out proceeds may have tax implications depending on use.
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Estimates only. This calculator is not a loan offer, loan approval, official Loan Estimate, Closing Disclosure, tax advice, legal advice, or financial advice. Actual payments, rates, taxes, insurance, mortgage insurance, closing costs, and loan terms may vary. Contact a qualified lender, tax professional, or financial advisor for guidance.