The builder lender's claim is plausible, so get the recast policy in writing before you weigh it against the 5.75% offer. A recast and a refinance are different tools. A recast re-amortizes your existing loan after a large lump-sum principal payment: the servicer recalculates the payment on the reduced balance at your existing rate and remaining term, so the rate and loan stay put and only the payment drops. A refinance replaces the loan entirely at whatever rate is available then. On eligibility, conventional loans backed by Fannie Mae or Freddie Mac do permit a recast after a substantial principal paydown, but the servicer is not obligated to offer one. Your loan can also be sold, so the company servicing it down the road, and that company's policy, controls whether a recast actually happens. Government loans (FHA, VA, and USDA) don't provide for recasts at all. So a flat no on this specific loan is uncommon but entirely possible. What we'd do: get the recast policy stated in the loan documents rather than as a verbal answer, then price it against the incentive. If the ability to recast matters to you, say you're expecting a lump sum later, that's a real factor to weigh against the 5.75%. Confirm the policy directly with whoever will service the loan.