If you’re looking to reduce your monthly housing costs or realign your loan with your financial goals, two powerful options are available: a mortgage recast and a mortgage refinance. Both can lower your mortgage expenses, but they function in very different ways. Understanding how each works and when to use them will help you choose the most cost-effective strategy.

What Is a Mortgage Recast?

A mortgage recast—sometimes called reamortization—lets you apply a large, one-time payment toward your mortgage principal. Afterward, your lender recalculates your monthly payments based on the new, lower balance, while keeping your interest rate and loan term the same.

How a Mortgage Recast Works

Step	Action
Lump-Sum Payment	You make a large payment toward the principal
Recalculation Fee	Your lender charges a small fee ($150–$500)
New Monthly Payment	Your payment drops based on the reduced balance
Loan Terms Stay the Same	Interest rate and loan term remain unchanged

This strategy works best for borrowers with extra cash—such as from a bonus, inheritance, or sale of another property—who want to reduce monthly expenses without refinancing.

What Is a Mortgage Refinance?

A mortgage refinance replaces your existing loan with a new one. This option allows you to adjust your interest rate, change your loan term, or convert equity into cash through a cash-out refinance.

How Mortgage Refinancing Works

Feature	Refinance Action
New Loan Application	You apply for a new mortgage with current rates
Rate/Term Change	You can change your loan structure or interest rate
Cash-Out Option	You can borrow against your home equity if needed
Closing Costs	Typically 2%–6% of the loan amount in fees

This approach benefits homeowners seeking lower interest rates, shorter loan terms, or funds from their home’s equity.

Recast vs. Refinance: What’s the Difference?

Feature	Mortgage Recast	Mortgage Refinance
New Loan Required	No	Yes
Interest Rate Changes	No	Yes
Closing Costs	Low (under $500)	High (2%–6% of the loan)
Cash-Out Option	No	Yes
Credit Check Required	No	Yes
Eligible Loan Types	Conventional only	FHA, VA, USDA, Conventional

When to Choose a Mortgage Recast

You should consider a mortgage recast if:

• You’ve received a large one-time payment
• You want to reduce your monthly mortgage payment
• You’re satisfied with your current interest rate and loan term
• Your loan is conventional (not FHA, VA, or USDA)
• You do not need to access your home equity

When to Choose a Mortgage Refinance

Choose a mortgage refinance if:

• Interest rates have dropped and you want to lock in savings
• You want to shorten your loan term and pay off your home faster
• You’re aiming to eliminate mortgage insurance on an FHA loan
• You need cash from home equity for other financial goals
• You plan to stay in your home long enough to break even on closing costs

How to Calculate the Break-Even Point

To determine whether refinancing is worth it, calculate your break-even point—the number of months it takes for your monthly interest savings to exceed the upfront closing costs.

Calculation	Purpose
Closing Costs ÷ Monthly Savings	Tells you how long it takes to break even
Compare with Expected Tenure	Helps you decide if refinancing is a good choice

If you expect to move before reaching that point, refinancing may not make sense.

Bottom Line

When comparing mortgage recasting vs. refinancing, the right choice depends on your current loan, financial goals, and how long you plan to stay in the home. A mortgage recast is ideal if you have cash available and want to lower monthly payments without a new loan. A mortgage refinance, on the other hand, provides more flexibility in rate, term, and access to equity.

Evaluate your priorities carefully and consult with one of our trusted loan officers before deciding.

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