Refinancing replaces your entire loan with a new one (new rate, new terms, new closing costs). Recasting keeps your current loan but applies a lump-sum payment to reduce your balance and lowers your monthly payment.
Recasting costs $200-$500 versus $3,000-$6,000 for refinancing. Recasting is cheaper but only works if you have a lump sum and do not need to change your rate.
Refinancing
When you refinance, you pay off your old loan and take out a new one. This allows you to change your interest rate, loan term, or loan type. You can also take cash out of your equity. Refinancing requires a credit pull, income verification, and appraisal. Closing costs typically range from $3,000 to $6,000.
Recasting
When you recast, you keep your current loan and interest rate. You make a lump-sum payment toward the principal, and the lender recalculates your monthly payment based on the new lower balance over the remaining loan term. No credit check, no appraisal, no new loan. The cost is typically $200-$500.
When Recasting Makes Sense
- You received a lump sum (inheritance, bonus, sale proceeds)
- You want to lower your monthly payment without changing your rate
- Your current rate is already good and you do not want to pay refi costs
- You have a conventional loan (FHA and VA recasting is more limited)
When Refinancing Makes Sense
- Your current rate is significantly higher than current market rates
- You want to change from an ARM to a fixed rate
- You want to cash out equity
- You want to change your loan term (e.g., 30-year to 15-year)
Cost Comparison
| Feature | Refinance | Recast |
|---|---|---|
| Cost | $3,000-$6,000 | $200-$500 |
| Rate change | Yes | No |
| Credit check | Yes | No |
| Appraisal | Often required | No |
| Lump sum required | No | Yes (typically $5K-$10K minimum) |
