What Is The Difference Between Refinancing And Recasting Your Mortgage? | Refinance Or Recast?

What Is The Difference Between Refinancing And Recasting Your Mortgage? | Refinance Or Recast?

so what is the difference between refinancing and recasting your mortgage okay that is a great question that came in from one of our subscribers and we're gonna talk about that in today's training hey everyone it's Mike Adams and on this channel we empower individuals to achieve freedom to improve financial literacy and business ownership if you are new to this channel make sure to click subscribe and click the bell so that when you get notified on any and all of our future training so in today's video guys we're gonna be discussing you know what is the difference between refinancing and recasting your mortgage and recasting is also sometimes called re amortize mortgage and so again this is a great question that came in from one of our subscribers and for those of you guys that didn't know I love answering your guys's questions and every now and then I'll see a question that pops up multiple times and whatever you guys are commenting on these videos it's actually me you know going through there and answering your guys's questions and I try to answer them as quickly as possible and now this is one that actually came up a couple of times recently and I was like you know I think it's time to have a discussion about this just so that what people can understand the difference between refinancing and recasting your mortgage and if you've seen other videos on this channel we've talked about refinancing before okay and again there is a time and a place for refinancing okay and you know so I don't I don't want to be that guy that's like I'll never refinance because guess what you know there's gonna be scenarios where it makes sense to refinance it is good for your cash flow you know if you're able to take a bunch of debts and consolidate them into a let's say you do like a cash out refinance you're able to consolidate some debts into one lower payment it can be better on your cash flow so I don't want to be you know you know Negative Nancy when it comes to refinancing but in most cases okay you know it's not necessarily the best idea and what we know about refinancing is that you're resetting the low okay if you're in a 30-year mortgage and you're in there for five six years and then you refinance to another 30-year loan all you've done is you've reset the clock on yourself and you're gonna end up spending more time in your property in the front end of that loan where the majority of your payment's going straight to the banking interest so one key thing and let's just start with refinancing since we're already there with refinancing what we're doing is essentially you are getting a new loan okay so your originating a brand-new loan that's going to replace your current loan okay and so you know the deal with refinancing you know sometimes you know it can again it can make sense in some cases especially if your original mortgage let's say your mortgage is at you know five or six percent and now over the last three four years your credit has improved greatly right now you got a seven sixty seventy eighty credit score and now you're able to get you know three point two five no three point five percent interest rate on your mortgage yo hey you can you know save a couple of points by refinancing and bringing in a new loan to pay off your old loan and now you have this new loan okay at a lower interest rate and if you're dropping that many points you could okay you could you'd have to run the numbers but you could end up still saving money and interest yeah you know it's kind of hard to say because again you're resetting the amortization you're going back to day one and a brand new loan or again the majority of your payment's going right to the bank and interest okay so you just have to be very very careful when it comes to refinancing and have a very specific reason as to why you're doing it because again you're bringing in a new loan along with that since you're creating a new loan there are gonna be loan origination fees right or junk fees whatever you want to call them and typically loan origination fees are gonna be anywhere from two depending on the bank two to eight percent okay again depending on the bank of the amount of the loan so if you're talking about a $200,000 refinance okay at two percent that's a $4,000 worth of fees you know for your refinance and sometimes you'll either pay those upfront or they will I'm into your loan right and then that way they can be a part of the amortization and you can pay interest on that okay but again upwards of 8% okay on 200,000 that would be sixteen thousand dollars worth of fees so there are fees associated with refinancing because you're creating a new loan okay so that's the general on refinancing again you're bringing you a new loan to pay off your current loan really only want to do this if a you can get a much lower interest rate okay or B you have a need to increase your cash flow like let's say you're just in a crunch it's like look I got all these payments going on and I have the ability to do a refinance okay and maybe save you don't have a point in interest maybe even get the exact same interest rate but allowing yourself to roll okay some of these other debts into one debt okay now you instead of having you know three grand worth of payments now you just have a you know eighteen hundred dollar mortgage payment you save yourself 200 bucks there increasing your cash flow okay so if you're in a cash flow crunch again refinancing could be an option but again you've got to run those numbers and be aware that you are bringing in a new loan and you're starting back at the beginning of that loan or the highest percentage of your payment is going straight to the bank and interest okay so what is recasting alone okay so recasting is essentially where you are taking and and this is gonna require you to put down some cash okay so let's say you have your $200,000 loan and you've had it for about a year and you're like okay the what are the main reasons why you'd look at recasting is because you want to reduce your monthly payment okay and that's really the primary reason why you'd want to look at recasting is like look okay I'm willing to make a chunk payment here I'm willing to make a big payment to reduce the balance in this in this mortgage and what the what the bank will do is they'll say okay well room we'll recast it for you and instead of you having that same payment that you had before that same size okay they will actually you know say okay paid down you know 40 grand let's say you had 40 grand in cash on you okay you know you're in Minnesota you got a scratch-off ticket there you hit 40 grand on it okay look I want to put this down on the mortgage okay will you take your balance from 200 down to 160 okay and it's like okay now and you have a choice are you can either a keep making your same payments on that mortgage and in continuing to knock it down or if you're like you know what I would love to free up a couple hundred bucks here a month in cash flow let me call the bank and see if they will recast this thing for me and so what they're doing is they're basically just restructuring your current loan so you're not bringing it's not like a refinance where you're bringing in a new loan you're gonna have to pay all kinds of fees typically a recasting feel cost you a couple hundred bucks so you know you're not looking at you know 2 to 8 percent of the amount of a new loan because there is no new loan they are simply restructuring the terms on your current loan and again you will have to make a sizable payment in cash directly to your mortgage company some banks minimum five thousand you know some banks ten thousand okay but if you're gonna make a big principal down payment that's what it's gonna be kind of a prerequisite to you having the ability to recast the your mortgage and so what they're gonna do is essentially okay let's say you put down the 40 grand so now you're down to 160 and you instead of having that roughly twelve hundred on our payment you're like okay I'd love to have a lower payment here here's the 40 grand recast this and what they'll do is they will just rerun they'll react eyes the loan okay so you're not reducing any time in the loan by recasting okay I want to make that clear okay if you're in a 30-year mortgage and then in year one okay you hit you know forty grand and you're gonna pay it down okay they're gonna recast your loan with the exact same interest rate okay and also for the exact same duration of time so it's not going to necessarily knock time off your loan they're just simply going to reduce the size of your payment okay which will free up some cash flow for you ready to free up a couple hundred bucks a month in cash flow but it's not reducing the of time that you're actually in the loan okay when you recast that so again recasting makes sense for some it really just depends on your goals I mean if your goal straight up is you know hey you're fine stay in this loan for the long term and you just simply you have the ability to put down some cash you just want a smaller monthly payment that's basically the primary reason why you'd look at recasting you just want to reduce the size of your monthly payment but again the duration of your loan is gonna stay the same now if you're looking to actually pay off the loan faster paying it off you know quicker using a strategy you like velocity bank and maybe you're using that strategy you know recasting isn't necessarily going to be a big benefit if you're already at that point where you're chunking down your mortgage because you're already sending all of your cash flows already going to it anyway so reducing the size of your payment doesn't really benefit you in that way re amortize in the loan again that doesn't change the duration that you're gonna spend inside of that loan okay so again you know specifically the reason why you want to recast is simply so you could reduce your monthly payment I will require you to put down a large principal payment okay and again it's different from refinancing because you're not bringing in a new loan you are simply modifying the terms on your current loan based on the fact that you're able to make a large a principal down payment on your mortgage so there you go guys that's the difference between refinancing and recasting again two completely different things and which will make sense for you okay it always depends on your particular goals again refinance and can work and be able to benefit to somebody if they have a need to drastically increase their cash flow of your month a month and you're really struggling and you have the ability to refinance it consolidate some debt that can benefit your cash flow but there are gonna be fees and you are resetting the clock if you you know again you go from a 30-year mortgage paid on it for five years now you're gonna consolidate some debt give up some of your equity you could solid eight some debt in there you're resetting the clock on that can you bring yourself back to the beginning where the majority of your payments going right to the bank and interest so you got to be aware of that have a plan for that if you're gonna refinance okay and again recasting is you're simply remodeling you're modifying the terms on your current loan now it will reduce the size of your monthly payment but it's not gonna reduce the amount of time you're gonna spend in the loan it's gonna be realized with the same amount of time that you currently have left on your current loan so hopefully you guys found value in this training you know if you did make sure to give this video a like give it a comment below and I will see you in the next video [Music]

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