Strategy

Recast vs. Refinance (vs. simple lump-sum payments)

The difference between just sending extra to principal, asking your servicer to recast your loan, or doing a full refinance—and how to know which path actually helps your budget and long-term plan.

For existing homeowners Compare lump-sum, recast & refinance See when a new loan is (and isn’t) worth it

Start your pre-approval → Ask your questions first

Equity moves at a glance

~5 min read

Three different ways to put extra money to work

When you get a bonus, inheritance, or proceeds from another sale, you have options. You can simply pay down principal, request a recast (if eligible), or explore a full refinance.

① Understand how a straight lump-sum payment changes interest and payoff time.
② See when a recast can lower your monthly payment without a new loan.
③ Learn when a full refinance is worth the cost—and when it’s not needed.

Plain-English • Existing homeowners Best used before moving big money

Smart tools to compare your options
Use these calculators to get a rough feel for payments on your current loan versus a potential new loan. Then we can layer in true recast math and payoff timelines side by side.

Run affordability & payment numbers → Estimate monthly payment

Coaching insight

Who this guide is for

This guide is for you if you already own a home and you’re wondering what to do with a lump sum you could put toward your mortgage.

It’s especially helpful if you:

Just sold a previous home and have extra proceeds sitting in the bank.
Received a bonus, inheritance, or payout and want to lower risk or payments.
Want to see if you can drop your payment without giving up a great rate.
Are comparing a simple lump-sum payment, a recast, and a refinance and want to know which one fits your plan.
Want a clear explanation of where recasts are allowed and where they’re not— especially on non-conventional loans.

The sweet spot is reading this before you send a large payment or sign up for a new loan—so your equity moves are intentional, not rushed.

Definitions

Three paths: lump-sum, recast, and refinance

1. Simple lump-sum principal payment

You send a one-time extra payment straight to principal on your current loan.
Your required monthly payment usually stays the same, but more of each payment now goes to principal.
You shorten your payoff timeline and reduce total interest over time.
No new loan, no credit pull, no closing costs—just discipline and a clear plan.

2. Loan recast (re-amortization)

You make a qualifying lump-sum principal payment and ask your servicer to recalculate your payment based on the lower balance and remaining term.
The interest rate and maturity date stay the same; only the monthly payment drops.
There’s usually a small servicer fee and a minimum lump-sum requirement (often several thousand dollars—varies by lender).
No full re-underwrite, no new appraisal in most cases, and generally less paperwork than a refinance.

3. Full refinance

You replace your current mortgage with a brand-new loan—new rate, new term, new closing package.
Allows you to change rate, term, loan type, and sometimes remove MI or pull cash out.
Comes with closing costs, new underwriting, and a reset timeline on your payoff date.
Whether it’s smart depends on the rate difference, costs, and how long you plan to keep the new loan.

All three paths can be useful—but they solve different problems. The rest of this guide helps you match the tool to your actual goals.

Mechanics

How a recast actually works (and where it’s allowed)

The recast process

A recast is simply a re-amortization of your existing loan after a large principal payment.

You send a lump sum, designated to principal reduction.
You request a recast from your servicer and pay a modest recast fee (amount varies by company).
The servicer recalculates your payment using:
- Your current rate
- The new, lower balance
- Your remaining term
The result: a lower monthly payment without starting a brand-new loan.

Where recasts are usually allowed

Recasts are most commonly available on conventional fixed-rate loans and only if your loan’s investor and servicer allow it.

Typically available on many conventional conforming loans, case by case.
Not typically offered on FHA, VA, USDA, HELOCs, or many non-QM / specialty products.
Some jumbo or portfolio loans may allow recasts, but rules are highly specific to the investor.
Before you move a big lump sum, we’ll confirm if your loan is actually recast-eligible.

Big picture: a recast is about payment relief on the same loan. If you love your current rate but want a smaller payment, this is worth exploring.

Strategy

When a full refinance may be the better tool

Refinance may make more sense when…

A new loan can solve more than just “extra money to apply.”

Today’s rates are meaningfully lower than your current rate.
You want to shorten or extend the term (for example, move to a 15-year or 30-year).
You’d like to remove mortgage insurance or change loan programs.
You’re combining multiple loans (first + HELOC) into one fixed payment.
You need additional cash-out for renovations, debt payoff, or other priorities.

You may want to pause or rethink a refinance when…

A new loan might not move the needle as much as it seems.

Your current rate is already competitive with today’s market.
Closing costs would take a long time to break even given how long you plan to keep the new loan.
You’ve just closed recently, and there may be industry rules and pricing considerations around very early payoffs that we’ll talk through before you rush into a new loan.
A simple lump-sum payment or recast gets you most of what you want with far less friction.

The right move isn’t “always refinance” or “never refinance.” It’s about how costs, timing, and your real plans line up.

Real-world example

Same $40,000 lump sum—three different outcomes

Example scenario (for education only)

Imagine a homeowner with a solid 30-year fixed mortgage who receives $40,000 from the sale of another property.

Option A: Simple lump sum. They apply the $40,000 directly to principal. Their payment stays the same, but they shave years off the loan and cut total interest.
Option B: Lump sum + recast (if eligible). They apply $40,000 to principal and request a recast. The rate and term stay the same, but the monthly payment drops, freeing up cash flow in the budget.
Option C: Full refinance. They use the $40,000 as part of a new loan strategy—maybe lowering the rate, changing the term, or consolidating other debts. There are closing costs and new underwriting, but the overall structure shifts.

On paper, all three use the same $40,000. In real life, they create very different cash flow, risk, and flexibility. That’s why we model them side by side instead of guessing.

Next steps

What to think through before you move a lump sum

Before you decide between a lump sum, recast, or refinance, it helps to be clear on a few basics:

Your time horizon – how long you expect to keep this home and this loan.
Budget priorities – whether you care more about lower payment now or faster payoff later.
How new your current loan is – recent loans can have extra pricing and investor considerations if they’re paid off very early.
Loan type – whether you’re in a conventional loan that may allow recast, or a FHA, VA, USDA, HELOC, or specialty program that typically does not.
Other goals – upcoming moves, renovations, education, business plans, or retirement that also need cash.

From there, we can compare all three options—lump sum only, lump sum + recast, and full refinance—and build a plan that fits your reality, not just a rule of thumb.

Smart questions

Questions to ask your servicer and loan advisor

These questions help you get clear answers before you send a large payment or sign up for a new loan:

Is my current loan eligible for a recast? If so, what’s the minimum lump sum and fee?
If I send a lump sum but don’t recast, how does that change my payoff timeline?
What would my payment be after a recast versus after a refinance?
What are the total costs of a refinance? (Closing costs, prepaid items, and any financed costs.)
How long is the break-even period if I refinance into a new loan?
Given how recently I closed, are there any timing or program considerations I should know about before paying off my current loan with a new one?

Clear answers turn a “quick decision” into a thoughtful equity strategy that supports your bigger financial picture.

Ready to see whether a recast, refinance, or simple lump sum fits best?
We’ll walk through your income, debts, savings, loan type, and timeline—and compare a lump-sum payment, recast, and full refinance side by side so you can choose the move that supports your budget and long-term goals.

Start your pre-approval → Ask your questions first