Recast vs refinance calculator
Enter your loan and the rate a lender offered you on a new loan (a refinance).
- Which option costs less.
- Payment after a Recast.
- Payment after a Refinance.
- Closing costs paid back in
This covers only the part of your payment that repays the loan and its interest. Taxes and insurance (escrow) are billed on their own. Loans backed by the government (FHA, VA and USDA loans) do not qualify for a recast.
01 Recast, refinance, or extra principal
With a recast, you keep your loan: you make one big payment (a lump sum), and then your monthly payment drops. With a refinance, you swap your loan for a new one with a different interest rate. You also pay closing costs, the fees to set it up. Principal means the amount you still owe on the loan. This table shows what each choice would cost if you paid $50,000 at one time.
Say you owe $325,000 at a 5.25% rate with 300 months left, and you pay $50,000 at once. A new loan at 4.5% costs $6,000 to set up, and you keep it for 7 years:
| Option | Recast | Extra principal | Refinance |
|---|---|---|---|
| Monthly payment | $1,647.93 | $1,947.56 | $1,393.38 |
| Cash on top of the lump sum | $250 | $0 | $6,000 |
| Paid off in | 25 years | 18 years 5 months | 30 years |
| Cost over 7 years | $368,640 | $363,222 | $362,367 |
| Closing costs paid back in | No closing costs | No closing costs | 1 year 11 months |
Cash on top of the lump sum means the recast fee or the closing costs you pay. The cost row totals three things: the payments made during the years you hold the loan, the extra cash, and the balance left at the end.
Amortization schedule in Excel: a spreadsheet with every payment, listed month by month.
02 Refinance rate at which a recast is the better deal
If you pay $50,000 toward a $325,000 loan, you still owe $275,000. A refinance turns that $275,000 into a new 30-year loan. Its payment is less than the recast payment if the new rate is below about 6.00%. Still, a lower payment is only part of the cost. A refinance also comes with closing costs (the fees to set up the new loan), and you keep paying interest for more years.
In every row, the recast payment is $1,647.93. That is for $325,000 at a 5.25% rate with 300 months to go, after you pay $50,000 in one payment and a $250 fee.
| Refinance rate | Refinance payment | Compared with the recast | Lower payment |
|---|---|---|---|
| 4.50% | $1,393.38 | $254.55 lower | Refinance |
| 5.00% | $1,476.26 | $171.67 lower | Refinance |
| 5.50% | $1,561.42 | $86.51 lower | Refinance |
| 6.00% | $1,648.76 | $0.83 higher | Recast |
| 6.50% | $1,738.19 | $90.26 higher | Recast |
03 When a refinance is the better choice
- You can get a rate today that is clearly lower than yours, and you will stay with the new loan until the savings cover its closing costs.
- You want to stop paying FHA mortgage insurance (an added monthly fee that FHA loans carry), or you want a loan that lasts a different number of years. A recast cannot do either.
- A US government agency backs your loan, whether it is FHA, VA or USDA, so recasting is not available to you.
To see typical rates, check the Freddie Mac weekly average 30-year rate. Freddie Mac, a large company, backs home loans. In the calculator, put in the rate that a lender has offered you.
04 Recast or refinance: questions
Is it better to recast or refinance?
Recast if your rate is already low: you keep that rate and pay a small fee. Refinance if a clearly lower rate is available and you will keep the new loan until the savings cover the closing costs. That point is called the break-even point.
How can I figure out the break-even point for a refinance?
Your break-even point counts the months it takes for a lower monthly payment to cover the extra closing costs that come with a refinance. Type your numbers into the calculator and it figures this out for you.
Does a recast have any effect on my credit?
A recast keeps your current loan, so there is no application and no full credit check. A refinance is a brand-new loan, so it needs both.
Which closing costs should I type in?
Use the total on page 2 of your Loan Estimate. That is the form a lender gives you listing what the loan will cost. A lender has to give you one within three working days after you apply.