Two ways to use a windfall
You have a lump sum. Recast the note, or replace it?
Both lower the payment. Only one keeps your rate, your term and your escrow account, and only one costs you a full closing. The arithmetic decides.
Same horizon, same money
Compare both over the payments you have left
Closing costs are financed so the two options are judged on the same remaining term. Change any figure and both columns recompute.
Over the remaining term, counting fees and closing costs
Refinance wins by $43,718
New monthly principal and interest
- Recast saves
- $410.48/mo
- Refinance saves
- $547.17/mo
- Balance after the lump sum
- $352,500
- Amount refinanced
- $357,400closing costs financed
- Interest left, recast
- $414,379
- Interest left, refinance
- $366,011
Payment today $2,822.05 · break-even on the closing costs 36 months
Refinancing costs $43,718 less than recasting over the remaining 318 payments, once the $4,900 in closing costs is counted.
Not every note can be recast. Government loans (FHA, VA, USDA) cannot; most conventional loans can after a minimum curtailment, usually $10,000 or 10% of the balance. Estimates for illustration only.
Each line starts at its day-one cost (the recast fee or the closing costs) and adds the interest paid over the remaining term.
- Recast
- Refinance
Show the data as a table
| Year | Recast | Refinance | Difference |
|---|---|---|---|
| Day one | $250 | $4,900 | −$4,650 |
| Year 1 | $24,333 | $26,636 | −$2,303 |
| Year 2 | $48,072 | $48,022 | $50 |
| Year 3 | $71,442 | $69,036 | $2,406 |
| Year 4 | $94,416 | $89,653 | $4,763 |
| Year 5 | $116,968 | $109,850 | $7,118 |
| Year 6 | $139,066 | $129,599 | $9,467 |
| Year 7 | $160,678 | $148,872 | $11,806 |
| Year 8 | $181,771 | $167,640 | $14,131 |
| Year 9 | $202,307 | $185,871 | $16,436 |
| Year 10 | $222,247 | $203,530 | $18,717 |
| Year 11 | $241,549 | $220,582 | $20,966 |
| Year 12 | $260,166 | $236,989 | $23,177 |
| Year 13 | $278,051 | $252,709 | $25,342 |
| Year 14 | $295,152 | $267,700 | $27,452 |
| Year 15 | $311,413 | $281,916 | $29,497 |
| Year 16 | $326,774 | $295,307 | $31,467 |
| Year 17 | $341,171 | $307,822 | $33,349 |
| Year 18 | $354,537 | $319,406 | $35,131 |
| Year 19 | $366,798 | $330,000 | $36,798 |
| Year 20 | $377,875 | $339,541 | $38,334 |
| Year 21 | $387,685 | $347,964 | $39,721 |
| Year 22 | $396,138 | $355,198 | $40,940 |
| Year 23 | $403,137 | $361,167 | $41,969 |
| Year 24 | $408,579 | $365,793 | $42,786 |
| Year 25 | $412,354 | $368,991 | $43,363 |
| Year 26 | $414,343 | $370,670 | $43,673 |
| Year 27 | $414,629 | $370,911 | $43,718 |
Side by side
What each one actually does to your loan
| Recast | Refinance | |
|---|---|---|
| What changes | The payment only | Rate, term, payment and note date |
| Interest rate | Unchanged | Whatever the market gives you today |
| Cost | A flat servicer fee, about $250 (sample) | Full closing costs, $3,500 to $6,500 on a typical Boston file (sample) |
| Credit and income check | None | Full underwrite, new credit pull, new income documents |
| Appraisal | None | Usually required unless a waiver is issued |
| Escrow account | Continues untouched | New account funded at closing; the old one is refunded within 20 days |
| Timing | Two to four weeks after the funds post | Three to six weeks, plus a three day right of rescission on a primary residence |
| Term | Remaining term is kept | Resets unless you deliberately shorten it |
Scroll the table sideways
Cost ranges are sample figures for a Greater Boston file and are not a quote.
Before you send the money
A curtailment applied the wrong way becomes plain extra principal, which is not what you wanted if the goal was a lower payment.
No. That is the whole point of it. The note stays exactly as it is, including the rate, the term and the maturity date. Only the payment is recalculated, against the smaller balance.
Most conventional servicers require a minimum curtailment of $10,000 or 10% of the balance, whichever is greater, and a loan that is current with no recent late payments. The servicer fee is typically around $250 as a sample figure.
FHA, VA and USDA loans cannot be recast. Neither can most loans still inside their first payment or in an active loss mitigation plan. Jumbo and portfolio loans vary by investor, so we check the servicing agreement before you send the money.
No. Extra monthly principal shortens the term and leaves the payment alone. A recast keeps the term and lowers the payment. If your goal is cash flow, recast. If your goal is being done sooner, keep the payment and keep prepaying.
Then run both. A large enough rate improvement beats a recast even after closing costs, and the tool above solves the break-even in months. If you will move before the break-even, the recast usually wins.
Tell us the number and the date
Give us the lump sum and when you expect it. We will price a refinance the same day and pull your servicer's recast policy, so you can see both answers before you commit.
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