A recast is when you make a large principal payment on your mortgage, then ask the servicer to re-amortize your remaining balance over the original term. Same rate. Same end date. Lower monthly payment. Usually costs $150 to $500.

A refinance is a brand-new loan. New closing costs. New rate. New term. Sometimes the right answer. Often not.

If you inherit money, sell a business, or come into a windfall while sitting on a 3% mortgage, you almost certainly want a recast, not a refi. Your bank will not proactively tell you this.

The rule of thumb: recast when the rate you have is better than the rate you'd get. Refi when the market has moved enough to justify closing costs plus the reset of your amortization clock.