Recast vs. Refinance Calculator
You have a lump sum. Should you "Recast" your current loan or "Refinance" to a new one?
How This Tool Works
This calculator compares two strategies for lowering your mortgage costs when you have a lump sum of cash: Recasting your current loan vs. Refinancing into a new one.
- Recasting Logic: You pay a lump sum (e.g., $50,000) and the lender "re-amortizes" the remaining balance. Your interest rate and end-date stay the same, but your monthly payment drops.
- Refinancing Logic: You get a new loan with a new interest rate and term. The lump sum is used to reduce the starting balance of the new loan.
- Comparison: We evaluate the upfront costs (recasts are usually ~$250; refis are $3,000+) vs. the long-term interest savings to see which "wins."
How to Use (Steps)
- Current Loan: Enter your remaining balance, interest rate, and years left.
- Lump Sum: Enter the cash amount you plan to put toward the principal.
- Refi Quote: Enter the interest rate, term, and closing costs for a potential new loan.
- Analyze: Compare Scenario A (Recast) vs. Scenario B (Refinance) to see your new payments and total interest.
Example Calculation
Scenario: $250,000 balance at 6.0%, 25 years left. $50k Lump Sum.
• Recast: Monthly payment drops from ~$1,610 to ~$1,288. Cost: $250.
• Refinance (5.5% / 30yr): Payment is ~$1,135. Cost: $4,000.
• Verdict: The Refi offers the lowest payment, but resets your clock to 30
years and costs $3,750 more upfront. If you want to be debt-free faster, the Recast is the
winner.
Why This Tool Is Accurate
Many people assume a lower interest rate (Refinance) is always better. However, when you factor in the high closing costs and the potential "reset" of a 30-year term, recasting often provides better net utility for homeowners who already have a decent rate.
Limitations & Disclaimer
Not all mortgage types (like FHA or VA) allow recasting. Always check with your servicer first. Disclaimer: Calculations are estimates for educational planning only.
Frequently Asked Questions
A recast is when you pay a lump sum toward your principal and the lender recalculates your monthly payment based on the new balance. Your interest rate and remaining term stay exactly the same.
Recasting is better if you have a great interest rate and just want a lower monthly payment. Refinancing is better if market rates have dropped significantly, even if you don't have a large lump sum to put down.
No. Unlike refinancing (which involves a new credit pull and a new loan), a recast is simply an adjustment of your existing loan. It does not require a credit check or affect your score.