Recasting keeps your current loan but applies a lump-sum payment to reduce your balance, lowering your monthly payment. It costs $200-$500 (vs $3,000-$6,000 for refinancing). It does not change your rate or term, just the balance and payment. It is ideal when you have a lump sum and want lower payments without the cost of refinancing.
How Recasting Works
You make a lump-sum payment toward your principal balance, and the lender recalculates your monthly payment based on the new lower balance and remaining term. Your interest rate and loan term stay the same. On a $300K loan at 6.5% with 25 years remaining, a $50K lump-sum payment would reduce the balance to $250K and the payment would drop from $2,028 to $1,690, saving $338/month. The recast fee is typically $200-$500.
When It Makes Sense
Recasting is ideal when you have a large lump sum (inheritance, bonus, sale proceeds from a previous home, or savings) and want to lower your monthly payment without the cost and hassle of refinancing. It is also great when you have a low interest rate that you do not want to give up. If your current rate is 3% and refinancing would give you 7%, a recast lets you keep the 3% rate with a lower payment.
Recast vs Refinance: Comparison Table
| Factor | Recast | Refinance |
|---|---|---|
| Cost | $200-$500 | $3,000-$6,000 |
| Rate Change | No (keeps current rate) | Yes (new rate) |
| Term Change | No (same remaining term) | Yes (new 30-year term) |
| Credit Check | No | Yes |
| Time to Complete | 1-2 weeks | 30-45 days |
