Mortgage Recast vs Refinance: Which Saves More?
Both lower your monthly payment. One costs $300 and keeps your rate; the other costs $4,000 and changes everything. The right choice depends on one question nobody asks first.
The one question that decides it: has your rate situation changed? If rates are meaningfully lower than your current note rate, or your credit has improved enough to qualify for a better one, refinancing earns its closing costs. If rates are flat or higher — the situation most borrowers with 2021–2022 vintage loans face — a recast gets you payment relief for a $0–$500 fee and keeps the rate you already have.
Side by side
| Recast (re-amortization) | Rate-and-term refinance | |
|---|---|---|
| Typical cost | $0–$500 fee | 2–5% of loan ($8,000–$20,000 on $400k), often rolled into the loan |
| Rate | Unchanged | Current market rate — the whole point |
| Term | Remaining term preserved | Reset to 15/20/30 years (your choice) |
| Credit check / appraisal | Neither | Both, plus income documentation |
| Cash out | No — you put cash in | Possible (cash-out refi) |
| Best for | Payment relief, windfall deployment, keeping a below-market rate | Materially lower rates, term restructuring, debt consolidation |
The worked example
You owe $403,985.49 on a 6.25% loan with 28 years left (you are two years into a $414,000 origination; baseline total interest from here: $503,664.92 from origination, payoff Dec 2055). You have $45,000 from a bonus and a stock vest.
Path A — recast
Send the $45,000 with a $300 fee and request re-amortization. Your new payment drops from $2,549.07 to $2,263.24 — a $285.83/month cushion — and the payoff date barely moves. If you keep paying the old amount anyway (scenario C in the recast calculator), the payoff lands at Apr 2043 with total interest of $228,411.02 from today.
Path B — refinance
Suppose you can get 5.75% on a 30-year refinance. After ~$4,500 in rolled-in costs, the new payment is materially lower — but you have restarted the 30-year clock, and the breakeven against the recast path is measured in years of saved-rate times balance. Run both through the payoff calculator with your real numbers; the spread between your current rate and the offered rate must exceed roughly the amortized cost of refinancing to win.
Where the recast quietly wins
- You keep a below-market rate. Anyone holding a 3% loan should never refinance into a 6% market. A recast is the only lever that lowers the payment while preserving that rate.
- No underwriting risk. Self-employed, between jobs, credit dinged — none of it matters. The servicer does arithmetic, not judgment.
- Option value. The lower mandatory payment is insurance. You can always pay the old amount (scenario C); you cannot voluntarily raise a fixed contractual minimum if income drops.
Where refinancing still wins
- Rate gap ≥ ~0.75%. Above that, monthly savings typically recoup closing costs in 2–4 years, and every year after is pure gain.
- You need to restructure term. A 15-year refi both cuts the rate and forces the faster payoff — discipline built into the contract.
- Cash-out needs. Recasts only take money in, never out.
Rule of thumb: refinance for the rate, recast for the payment. If both rates are the same, the recast is strictly cheaper — the refinance fee is buying nothing.
Frequently asked questions
See the recast calculator's FAQ for eligibility mechanics (loan types, minimums, fees), or try your own numbers:
Try it: recast $45,000 on a $403,985.49 loan @ 6.25%
Balance $403,985.49, 28 years remaining, $300 fee. Open the recast calculator — pre-filled with these numbers. New payment: $2,263.24 (was $2,549.07); keep paying the old amount and finish 128 months sooner at $228,411.02 total interest.