Mortgage Recast vs. Refinance: A Comparison

If you’re looking for a way to save on your mortgage, you have several options. Refinancing and recasting a mortgage are options, both bringing savings such as a lower monthly payment and the potential to pay fewer interest costs.

Though the intricacies are different, there are pros and cons to each strategy, so it’s important to choose the right one. So, what’s the difference between recasting and refinancing your home loan? Here’s our take.


Recasting is making changes to your current loan after you’ve prepaid a large amount of your loan balance. You might, for example, make a sizable lump-sum payment, or you may have started adding extra to your monthly mortgage payments over the years, which puts you well ahead of schedule on your repayment. Your lender re-calculates all your monthly payments based on your loan balance, resulting in a lower monthly payment. Because your loan balance is much smaller, you also pay less over the remainder of your loan.

– You might not actually need to provide proof of income, document your assets or even make sure that your credit scores are free of issues.

– Lenders may need you to prepay a minimum amount before you qualify for any recasting.

– Government programs usually don’t qualify for recasting.

– Recasting for jumbo loans isn’t available from all lenders.


Refinancing is when you apply for a new loan and replace an existing mortgage with it. Your new lender pays off your loan with your old lender. Then, you make payments to your new lender in the future. Ideally, this loan should be smaller than your original borrowed sum so you enjoy a lower monthly payment.

– You may still have to pay closing costs, such as appraisal fees, origination fees.

– The biggest costs might be the extra interest and if you stretch your loan out over a long period of time, you’d have to start from scratch. With most loans, you pay higher interest in the early years and pay down the principal in later years. A new long-term loan may put you back again into those early, interest-heavy years.

Alternatively, do neither. If you really want to save money, you might want to pass on recasting and refinancing and instead pay extra on your mortgage, avoiding the temptation to switch to a lower monthly payment.