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Loan Recast vs Refinance Calculator

Enter your loan details, lump sum, and refinance terms to compare monthly payments.

How it is calculated

Both payments use the standard amortization formula P = B × r / (1 − (1 + r)−n), where B is the principal, r is the annual rate divided by 12 and 100, and n is the number of monthly payments. For the recast, B is the current balance minus the lump sum (never below zero), r comes from the current rate and n is the months remaining. For the refinance, B is the full current balance, with the new rate and the new term in months. The lump sum is applied only to the recast side. Closing costs and recast fees are not included, and a 0% rate simply divides principal by months. The difference is recast payment minus refinance payment, so a negative figure means the recast payment is lower.

Worked example

Balance $300,000 at 6.5% with 300 months left; lump sum $50,000; refinance offer 5.75% over 360 months. Recast: principal 300,000 − 50,000 = 250,000, monthly rate 6.5 / 1200 = 0.5417%, 300 payments, giving $1,688.02. Refinance: the full 300,000 at 5.75 / 1200 = 0.4792% over 360 payments gives $1,750.72. The difference is 1,688.02 − 1,750.72 = -$62.70, so the recast payment is lower by about $62.70 a month.

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Common mistakes

  • Comparing monthly payments of loans with different terms: the refinance here stretches to 360 months, so its lower rate is partly offset by more years of interest, which the monthly figure hides.
  • Entering the rate as a decimal (0.065) instead of a percent (6.5); the engine divides by 1200, so 0.065 would be treated as almost 0%.
  • Entering the remaining months as years. Both the remaining term and the new term must be in months.
  • Expecting the lump sum to reduce the refinance payment. It only reduces the recast principal; to model refinancing after paying down, lower the balance yourself.
  • Ignoring closing costs and the recast fee, which are not in the calculation and can change which option really wins.

Sources

About this calculator

A loan recast lets you apply a lump sum directly to your mortgage principal, after which the lender re-amortizes the remaining balance over the original loan's remaining term at the same interest rate, lowering your monthly payment without a new credit check, appraisal, or closing costs beyond a small recast fee. A refinance replaces the loan entirely with a new one — potentially at a lower rate or shorter term — but requires full underwriting, an appraisal, and closing costs typically running 2–5% of the loan amount.

Which is better depends on how the current market rate compares to your existing rate and how much cash you have available: a recast is attractive when your rate is already good and you simply want a lower payment, while a refinance can be worth the upfront cost when rates have dropped meaningfully. This calculator compares the resulting monthly payment under each path so you can weigh the trade-off in real numbers rather than rules of thumb.

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Comments (1)

  • Editorial team

    Monthly payments alone do not settle it. Divide any recast fee or refinance closing costs by the monthly saving to get the months to break even, then compare that with how long you expect to keep the loan. For example, 3,000 dollars of costs against a 100 dollar monthly saving takes 30 months. What break-even period would push you toward one path over the other?

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