Definitions and key differences
- Recast: You pay a lump-sum to reduce principal. Lender recalculates payment. Rate and remaining term stay the same.
- Refinance: You replace your mortgage with a new one at a new rate and term. Costs and underwriting apply.
Pros and cons at a glance
- Recast pros: Lower payment, minimal fees, no new underwriting.
- Recast cons: Rate does not change; cash is locked in the home.
- Refi pros: Potentially lower rate or term reset; restructure costs.
- Refi cons: Closing costs, points, credit and income checks.
Lower payment goal vs lower rate goal
Choose recast when your main goal is a smaller required payment and your existing rate is fair. Choose refinance when market rates are materially lower or you want a different term.
Cash-in needs vs cash-out needs
Recasting is a cash-in event. Refinancing can be structured as cash-in, neutral, or cash-out depending on equity and program rules.
Assumptions & Eligibility
- Servicer recast rules can require minimum lump sums (often $5,000–$10,000) and a fee.
- Refinance underwriting considers credit, debt-to-income, and loan-to-value.
- Watch for prepayment penalties or seasoning on the existing loan.
Baseline amortization of current loan
We compute principal-and-interest payments over your remaining term and estimate PMI until loan-to-value reaches 80%.
Recast math
Apply the lump-sum to reduce balance, keep the same rate and remaining term, and recompute the payment. A one-time recast fee is included.
Refinance math
Start with the current balance as the new base loan amount. Add points and other costs if you select roll into loan, otherwise treat them as cash at close. Compute the new payment at the selected rate and term.
- Current balance, rate, term, and remaining months
- Lump-sum amount (for recast) and recast fee
- New rate, term, points, and closing costs (for refinance)
- Home value, LTV, PMI/MI details
- Pay costs out of pocket vs roll into loan
- Servicer recast rules and minimum lump-sum may apply.
- Underwriting for refinance considers credit, DTI, and LTV.
- Prepayment penalties and seasoning can limit timing.
- Baseline amortization of current loan
- Recast math: apply lump-sum, recompute payment, keep rate/term
- Refinance math: new balance, new rate, new term, costs financed or paid
1) What happens to my interest rate with a recast?
Your rate and remaining term stay the same; only the required payment is recalculated after the lump-sum is applied.
2) Does a recast require a credit check?
Typically no. Most servicers only require that the loan be in good standing and that a minimum lump-sum and fee be paid.
3) How are refinance closing costs handled?
You can pay costs at closing or roll them into the new loan. Rolling increases the loan amount and may affect LTV and PMI.
4) How does this tool estimate PMI?
It uses a simple declining-balance model and removes PMI once the estimated LTV reaches 80%. Lender methods can differ.
5) What is the breakeven point?
The number of months for payment savings to offset fees. For recast, it uses the fee only; for refinance, it includes points and other costs.
6) Can I shorten my term with a recast?
Recasts generally keep the same term. To shorten a term, consider refinancing or making ongoing extra principal payments.
7) Are there tax implications?
Interest may be deductible depending on your situation and jurisdiction. Consult a qualified tax professional.
8) What if I plan to sell soon?
If you expect to sell before breakeven, paying fees for a refinance or recast may not be worthwhile. Consider flexible strategies and prepayment without fees.
- Enter your current loan balance, rate, remaining months, home value, and PMI rate.
- Add a lump-sum and fee to model a recast.
- Set a new rate, term, points, and costs to test a refinance.
- Choose whether to roll costs into the loan.
- Compare payments, breakeven, and total costs.
- First derivatives of inverse trig functions
- Chain rule and product/quotient rules used
Note: This section is included by request pattern but not applicable to mortgages.