The three options
- Recast: lump sum to principal, same rate and term, lower payment.
- Pay extra: lump sum to principal, keep the same payment, finish years early.
- Refinance: a new loan at a new rate and term, with closing costs (often 2% to 6% of the loan).
The "cash now + interest" column adds what you pay up front (lump sum, fee, closing costs) to all future interest, so you can compare them fairly.
Worked example
$300,000 at 6% with 25 years left and a $50,000 lump sum:
- Do nothing: $1,932.90 per month, about $279,871 in future interest.
- Recast ($250 fee): $1,610.75 per month, about $233,226 in interest.
- Pay extra: $1,932.90 per month, paid off in 17 years 5 months, about $153,214 in interest.
- Refinance $250,000 at 5.5% for 30 years ($5,000 costs): $1,419.47 per month, the lowest payment, but about $261,010 in interest because the term restarts.
The lowest payment and the lowest total cost are rarely the same option. Choose based on whether you need cash flow or want to cut total cost.