You've got cash to put toward your mortgage. Should you recast or refinance?
They both lower your payment, but they work completely differently — and picking the wrong one can cost you thousands.
I'm Bill McCoy, a California mortgage broker (CA DRE #01212512). Here's how to decide.
The Core Difference
Recasting keeps your current rate and term. You pay a lump sum, and the lender recalculates your payment on the lower balance. Cost: $150-$500.
Refinancing replaces your loan entirely with a new one at today's rate. Cost: $4,000-$10,000+ in closing costs.
Not sure what recasting is? Start with Mortgage Recasting Explained.
Side-by-Side Comparison
| Feature | Recast | Refinance |
|---|---|---|
| Interest rate | Stays the same | Changes to current rate |
| Loan term | Stays the same | Resets (or you pick a new term) |
| Cost | $150-$500 | $4,000-$10,000+ |
| Credit check | No | Yes |
| Income verification | No | Yes |
| Appraisal | No | Yes |
| Timeline | 30-60 days | 30-45 days |
| Requires lump sum | Yes ($5K-$10K minimum) | No |
Real-World Example: Sarah's Decision
Sarah's situation:
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- Bought a $650,000 home in 2021
- Loan: $560,000 at 3.25%, 30-year fixed
- Monthly payment: $2,547 (P&I)
- She just inherited $100,000
- Current refi rates: 6.5%
Option 1: Refinance
- New loan: $460,000 at 6.5%
- New payment: $2,907/month
- Closing costs: $7,500
- Result: Payment goes UP by $360/month
Option 2: Recast
- Pay $100,000 toward principal
- New balance: $460,000 at 3.25%
- New payment: $2,001/month
- Recast fee: $300
- Result: Payment goes DOWN by $546/month
Sarah chose the recast. She kept her 3.25% rate, lowered her payment by $546/month, and paid $300 instead of $7,500.
When to Recast
- Your rate is below 5% and current rates are higher
- You've got $10,000+ in cash to put toward principal
- You want a lower payment without the hassle of qualifying for a new loan
- You're a retiree, lost a second income, or want more cash flow flexibility
When to Refinance
- Current rates are lower than your existing rate — even by 0.5-0.75%
- You want to shorten your term (30-year to 15-year)
- You need to pull cash out for renovations, debt payoff, or investment
- You want to remove PMI (refinancing drops it immediately at 20%+ equity)
- You have an FHA/VA/USDA loan that can't be recast
See when refinancing makes sense
The Numbers: $50K Lump Sum
Scenario: $600,000 loan at 4.0%, 30 years. You've got $50,000.
If you recast:
- New payment: $2,626/month (was $2,865)
- Monthly savings: $239
- Annual savings: $2,868
- Total savings over loan life: $86,040
- Cost: $300 recast fee
If you refinance at 6.25%:
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- New payment on $550K: $3,387/month
- Monthly savings: negative $522
- Cost: $7,500 in closing costs
In this scenario, refinancing actually raises your payment. The recast wins by a mile.
Broker's Tip: The math flips when rates drop below your current rate. If you're at 7% and rates hit 5.5%, refinancing saves you more long-term — even with closing costs. Always run both calculations.
Can You Do Both?
Yes. Recast now to lock in a lower payment at your current rate. If rates drop below your rate later, refinance then.
Recasting doesn't prevent you from refinancing in the future. It's not an either/or decision — it's a question of timing.
Not Sure Which Move Is Right?
I'll run the numbers on both options for your specific situation and tell you which one saves you more.
Better Offers Inc | CA DRE #01212512