The Refinance vs Mortgage Recast Calculator answers a question every homeowner with spare cash eventually faces: with a lump sum available, is it better to recast the existing loan (pay the balance down and re-amortize at the same rate for a small fee) or to refinance into a new loan at a new rate and term with full closing costs? Enter the current loan, the lump sum, and both offers, and it compares monthly payment, total interest, total cost, and savings for all three paths, including keeping the loan as it is.
How It Works
Every scenario uses the standard amortization payment formula. The recast applies the lump sum to principal, keeps your rate, re-amortizes over the remaining months, and adds the recast fee (a few hundred dollars where lenders offer it; $250 is the default here). The refinance applies the lump sum as the new loan's reduced starting balance too, then prices the new rate over the new term and adds closing costs, reporting the break-even month when cumulative payment savings repay those costs.
Parameters
| Input | Required | Meaning | |---|---|---| | Current balance, rate, remaining months | Yes | The loan as it stands | | Lump sum | Yes | Cash available to pay down principal | | Recast fee | No | Lender's recast charge (default $250) | | New rate, new term | Refi | The refinance offer | | Refi closing costs | No | Full cost of the new loan |
Worked example
Balance 2,473.73 and total remaining interest is about 50,000 lump sum is available.
Recast: balance falls to 2,120.34, total interest to about 56,017 of interest for a $250 fee. Payoff date is unchanged.
Refinance: 1,798.65, but the restarted clock stretches interest to about 6,000 of closing costs, the payment saving of $675 a month breaks even in about 8.9 months.
On pure total cost the recast wins this comparison (about 653,515 including fees and costs) despite the refinance's lower rate, because the refinance quietly adds five years of payments. On monthly cash flow the refinance wins by $322 a month over the recast. Which is "better" is therefore a question about your constraint: cash flow now, or total cost and an unchanged payoff date.
The traps in both products
A recast does not change your rate or your payoff date, and not all loans allow it (many government-backed loans do not, and most lenders set a minimum lump sum, often 10,000, and a limit on frequency). A refinance resets the term clock (the silent cost in the example), reopens underwriting and appraisal, and its break-even only matters if you keep the loan past it: selling or refinancing again before month nine in the example burns the $6,000. A third path the comparison frames implicitly is simply paying the lump sum without recasting: payment unchanged, term shortens dramatically, interest saving largest of all. If you do not need the lower payment, that baseline beats both products on cost.
Limitations
The model assumes fixed rates, no prepayment penalties, and that the lump sum is applied in both scenarios at the start. It does not price mortgage insurance changes, tax effects, cash-out differences, or the time value difference between a fee today and interest spread over decades beyond the totals shown. Lender eligibility for a recast must be confirmed with your servicer; offers vary and change.
The third option the comparison reveals
Notice what the three-way table makes visible: applying the lump sum with no recast and no refinance, keeping the original payment, pays the loan off years early and saves the most interest of all, because every dollar of the old payment above the new interest goes to principal. The calculator's "keep current" column assumes you bank the lump sum elsewhere, but the moment you apply it without re-amortizing, the payoff accelerates beyond both products. Choose the recast when you need the lower required payment as insurance (job uncertainty, a coming expense), choose the refinance when the rate gap is wide and you will stay past break-even, and choose the plain paydown when cash flow is comfortable and total cost is the goal.
Frequently Asked Questions
What minimum lump sum does a recast usually need?
Commonly 10,000, with a fee of a few hundred dollars, but servicers set their own rules and some loan types are ineligible entirely. Confirm before moving money.
Why can a lower refinance rate cost more overall?
Because the new loan restarts the amortization clock. Five extra years of payments can outweigh a point of rate, as the worked example shows. Compare total cost and payoff date, not just the payment.
What if I might move within a few years?
Then the refinance break-even month is the decisive figure: if you will sell before it, the closing costs never pay back and the recast (or a plain principal payment) is usually the better use of the lump sum.