The short answer
A recast lowers your monthly payment by re-spreading a smaller balance over the time you have left, while keeping your rate. A refinance replaces your loan with a new one to change the rate or term. On a $400,000 loan at 6.5%, a $50,000 lump sum plus a recast saves about $51,300 in interest. The same $50,000, with your payment left unchanged, saves about $152,600. Refinancing can beat both, but only if the new rate is lower and you don't reset the clock.
What a recast is
A recast, sometimes called re-amortization, is the quiet cousin of refinancing. You make a large payment toward principal. Your lender then recalculates your monthly payment based on the new, smaller balance.
Your rate stays the same. Your payoff date stays the same. Only the payment changes, and it goes down.
There's no new loan, no appraisal, and no credit check in most cases. Lenders that offer recasting commonly charge a few hundred dollars and require a minimum lump sum, often $5,000 to $10,000 or more. Many government-backed loans, including FHA and VA loans, generally can't be recast.
What a refinance is
A refinance pays off your current loan with a brand new one. People do it to get a lower rate, to change the term, or both.
Because it's a new loan, it comes with everything a new loan comes with: an application, an appraisal in many cases, and closing costs that often run 2% to 5% of the balance. Whether it saves you money depends almost entirely on the new rate and the new term. If you're unsure which path fits your loan, a licensed agent can lay them side by side in a free payoff projection.
A real comparison
Picture a family five years into a $400,000, 30-year mortgage at 6.5%. Their payment is $2,528. They've paid $126,140 in interest so far and still owe $374,444.
Then they receive $50,000: an inheritance, a sold business, a bonus. Here are their options:
| Option | New monthly payment | Lifetime interest | Saved vs. doing nothing |
|---|---|---|---|
| Do nothing | $2,528 | $510,178 | |
| $50,000 lump sum, then recast | $2,191 | $458,897 | $51,281 |
| $50,000 lump sum, keep paying $2,528 | $2,528 | $357,601 | $152,577 |
| Refinance to 15 years at 6.0% | $3,160 | $320,455 | $189,723, before closing costs |
| Refinance to 30 years at 6.0% | $2,245 | $559,889 | Costs $49,711 more |
A few things jump out.
The recast does what it promises. The payment drops by $338 a month, and the family saves about $51,000.
But the lump sum with no recast saves three times as much. The payment stays at $2,528, the balance is $50,000 lower, and every month more of that $2,528 goes to principal. The loan ends in 23 years and 4 months instead of 30.
And the last row is the trap. Refinancing into a fresh 30-year loan at a lower rate lowers the payment, yet costs nearly $50,000 more in interest, because it restarts a 30-year clock five years in. We cover this in mortgage payoff mistakes.
When a recast makes sense
A recast is the right tool when you want a lower required payment but don't want a new loan.
That makes it useful for people whose income is about to drop, such as a planned retirement or a move to part-time work. It's also a sensible middle ground if you want the security of a smaller required payment while you keep paying the old amount voluntarily. If money ever gets tight, you can fall back to the lower payment without calling anyone.
What a recast won't do is pay your loan off faster on its own. Your term doesn't change. For that, you need extra principal every month, which is what our guide to extra mortgage payments covers.
When a refinance makes sense
Refinancing makes sense when three things are true. Today's rate is meaningfully lower than yours. You'll stay in the home long enough to earn back the closing costs. And you choose a term that doesn't add years to your loan.
That last one matters more than most people think. Moving to a shorter term, such as 15 years, is where refinancing really pays. Our guide to refinancing to a 15-year mortgage walks through the math and the risks.
The quiet option that beats both
If you have a lump sum and your rate is reasonable, the simplest move is often the best one. Send the lump sum to principal and keep making your normal payment.
No fees. No new loan. No reset clock. In our example, it saved more than either a recast or a 30-year refinance.
The one exception is your safety net. Money sent to your mortgage is hard to get back. Keep three to six months of expenses in savings first, and make sure your family is covered if your income stops. That's what mortgage protection is for.
A different approach altogether
Recasting and refinancing both work inside the same basic structure: a fixed payment against a balance that shrinks slowly at first. Ridgewell's Mortgage Accelerator Program is designed to change that structure, so the money you already earn does more of the work. For qualifying households, it is designed to pay off a home in as little as 5 to 7 years.
Payoff timelines are illustrations for qualifying households and are not guaranteed.
Where to start
Ask your servicer two questions: do you offer recasting, and what does it cost? Then compare the answer against simply paying extra. For every option side by side, see how to pay off your mortgage faster.
If you'd like a licensed agent to run your real numbers, get a free payoff projection.
Examples assume a $400,000, 30-year fixed mortgage at 6.5% with a $50,000 lump sum at the start of year six, principal and interest only, figures rounded. Refinance examples exclude closing costs. Lifetime interest includes interest already paid.
