Podcast Episode - Suze School: Recasting Your Mortgage

ETFs, Home Mortgage, Investing, Mortgage, Mortgage Rates, Stock Market

October 24, 2021

Listen to Podcast Episode:

On this podcast, Suze explains how recasting your mortgage can help you in the short and long terms.  We also get updates about how inflation will affect your Social Security checks and bonds.

Podcast Transcript:

October 24th, 2021 and welcome to Suze School. Today, Suze School is going to cover quite a few topics so get ready for this one. But before I begin I just want to say a little update, that next week Alliant Credit Union will be choosing the seven winners of the sweepstakes. Yeah baby! And we will be announcing them in a few weeks on the podcast. So, keep listening to see if you won or not. Okay, next it's no secret that inflation is rampant. You see it all the time when you pull in to get gasoline, when you go to buy something, when you go to even book an airline ticket now. Every single thing everything is costing more, and it's gonna continue to cost more and more in my opinion. At least until they clear up all the shipping shortages and blockages and everything that's happening out there in the world until they clear all of that up. We're going to have inflation in my opinion. Now I can go in and I can talk about why that is but who even cares? It's just how it's going to be. So, there's a few things that that affects, the first thing that it affects is a good thing by the way, are for those of you who are getting social security. Oh, starting January 2022, you can expect a 5.9% increase in your social security check. That is a big deal. The reason that that's a big deal is I can't remember when there was really ever a 5.9% increase in a social security check in the past 10 or 15 or 20 years, really. I remember people calling into the Suze Orman show and saying there's no increase in my social security check. Suze it's only like 0.3%, I need more money. And even over the past five years I think the highest increase was in 2018 at 2.8%, last year in 2020 it was only 1.3% increase. But this year we are at 5.9%, that's huge in comparison to what has been going on in the past few years. But again, that increase is to cover the fact that your cost of living is going to be going up because of inflation. So that's good news for those of you who get Social Security. As well as for those of you who are on SSI or whose children are on SSI. You too, are going to be getting a 5.9% increase. Just so you all know remember that increase starts for those of you on Social Security January 2022. If you are on SSI, it begins December 31st, 2021. Now, that's good news. Also, inflation effects series I bonds, and series I bonds the I stands for inflation. Now, do you remember me a few months ago saying to you how I wanted all of you to buy series I bonds with money, that you don't need for five or 10 years or longer. Because you don't want to put money in a series I bond that you really think you're going to need within five years. And the reason for that is in the very first year, you are not allowed to take any money out of a series I bond whatsoever. After year one all the way through the first five years, if you take money out you will lose three months of interest. So, that's not what you want to do either. So, this is money that's there for at least five years or longer while it's there, you don't pay taxes on it. So that's great, and also with the series I bonds, you never pay state income tax ever. Just federal income tax. Also series I bonds, can absolutely be used in many situations for higher education costs where if you withdraw the money for a higher education cost, you don't have to pay any taxes on it whatsoever. Again, there are income qualifications for that, but that's not why I'm talking about it today. A lot of you because of that podcast have gotten, thank god, incredibly interested in series I bonds and now you're writing me and saying Suze, should I buy series I bonds right now or should I wait. And my advice to all of you is this, listen carefully, if you have not purchased series I bonds a few months ago when I first talked about it, I am asking you to wait until November 1st to make a purchase. But on November 1st I want you to make that purchase as soon as you possibly can and why is that? Interest rates on a series I bond are set for six months and they reset after May and after October. Those are the two months that they decide what is the new interest rate going to be. So, it is obvious that come November, the new interest rate is going to be between 5% and 7%. Most people think it's going to be 7.12%. But you only get the interest rate as to what is in effect when you make a purchase. So, if you made a purchase today, you would be getting 3.54% and that interest rate would be locked for the next six months. Because you are locked for six months and every time it resets, that interest rate is locked for another six months. So, if you were to purchase right now or before November 1st, you're only going to be making 3.54% for the next six months, got that. If you wait just simply wait until November 1st, you're going to be able to lock in whatever the new interest rate is, could be 7%, for the next six months. So, it's really important that all of you really start looking into series I bonds as a place for you to get a whole lot more interest than you could get anywhere else without any risk on it whatsoever. Just something for you to think about. I want to talk to you about something that I don't think a lot of you know anything about which is called recasting. Now a lot of you know when it comes to your mortgages, you know about refinancing a mortgage, you know about getting a mortgage to begin with. But have you ever heard about recasting a mortgage? Well, this is something that I think is really important given the fact that interest rates are so low right now, and maybe they're going to start to go up. That if you have a mortgage, even if it's at a low interest rate, a lot of the times you may find yourself in a situation where that mortgage payment is just too high and you can't refinance anymore because you already got the lowest possible interest rate, you can. And you don't really know what to do and a lot of you want to pay off your mortgage sooner. So, what do you do? You put lump sums of money or you pay extra on your principal every single month and that goes to reduce your principal, but your payment stays the same. So, we have a whole group of people out there who the main reason they refinance and do things like that is they need lower mortgage payments. If that is you, and you may have some extra money, I want you to just listen to me. Recasting is where you simply take a minimum of 5,000, some banks require 20,000, where you take the money and you put it into the account, and you re-cast the mortgage with your mortgage company, which means they reduce the principle that you owe and they give you a new amortization schedule based on the lower principal amount. You're still gonna owe for 30 years or 28 years, the length of the mortgage is not reduced. It's still a 30-year mortgage or if you've been paying for five years, it's still a 25-year mortgage or a 15-year mortgage. The length of the mortgage stays the same, but the amount of the mortgage absolutely changes. So, you've recasted it, you've given it a new look. So, you have a mortgage, maybe you got an inheritance, maybe you've got a bonus, maybe something happened where you have an extra five or 10 or $20,000 or you have that much sitting around, above your emergency money of 12 months. And you don't know what to do with it, because there's really no place that makes you feel safe and sound and you don't want to put in the stock market, you don't want to put it in Bitcoin, you just want to be safe and sound. Well, one of the best things you could do is to recast your mortgage, especially if you are struggling with your mortgage payment. It's very simple that if you just recasted your mortgage and a lot of banks do it for free, maybe it'll charge you a few $100s. You could absolutely reduce your mortgage payment that you are paying now, keeping the mortgage length the same because you put extra money in and reduced the principle that you owed. So, they redid your mortgage for you, not really no fees, nothing. And you've got to keep your same interest rate. Did that just make sense to you? It's a really important thing for you to think about. The reason that that's important is that let's say you had a mortgage payment of $2,800. It's really possible that if you recast it that that mortgage payment could drop to what, it could drop to $2,000 or $1,800 a month. So, you would have an extra $800 or $1000 depending on how much money you put in there, that would be freed up. And in a very strange way that money is also earning that 2.5% or 3.5% whatever your interest rate is, because you aren't going to be paying as much interest on that loan in the long run. So, that frees up $800, a $1,000 a month, then if you didn't need that extra $800 or $1,000 a month. Or any portion of it, if you then did that and sent that in to your principal as well, then that would do what it would reduce the length of your loan. So that is one way that you could absolutely get rid of your mortgage faster than you have any idea. So recasting is something that every single one of you, if you have a lump sum of money that you do not need above your emergency fund, that you want to keep safe and sound, and you own a home and it's a home that you want to keep. And you either are struggling with the mortgage payments, or you just want to lower your payments for whatever reason, then all you have to do is recast your mortgage and then if you have extra money, just put that extra money towards your mortgage payment, the principal and you can have your cake and eat it too. Now did I just confuse all of you? I hope I did not. But it's something that you really, really need to think about as I am a firm believer that by the time you retire, you absolutely want to own your home outright. And you want to do anything and everything you can, to quicken that process to make sure that happens. And one of the best ways to do it is by recasting, if you have the money to do so and put those savings right back into it as well. Just something to think about. Also recasting is a great thing that many of you could have done during covid, when maybe you were having trouble making your mortgage payments. Then all of a sudden, the moratorium was over and you weren't making quite as much money or only one of you was working now rather than refinancing or doing something like that. You could have re casted your mortgage, lowered your monthly payments if you had money to do so and gotten to keep the house as well. Next, let's talk about Bitcoin quite the rise it's had this past week, um, up down but still doing quite well for itself overall. But the big news this week was the pro shares Bitcoin strategy ETF that premiered, and a lot of people, the volume was crazy, jumped in to that ETF. The symbol by the way is BITO. That was pretty good. Suze. No problem there. Anyway. Um, you know, and they just jumped into it and somehow that is because they felt safer in an ETF, than they did in actually buying Bitcoin. But they did so really, with very little understanding of what this ETF, an ETF For those of you who don't know is an exchange traded fund. It's simply like a mutual fund that you should know about and hopefully you do. But that trades on an exchange so you can buy or sell it at any time. And this particular ETF, buys Bitcoin or a lot of you think that it buys Bitcoins but it does not by the actual Bitcoin. And the reason that I said a few days ago that I don't want any of you to buy it caused quite the upset because you didn't understand why in the world when I want you to do that, when you could get a chance to get into Bitcoin. The reason why is because this exchange traded fund as I was saying, does not by the actual Bitcoin. So, you don't own Bitcoin, you own the right to buy Bitcoin in the future at a certain price. Now why the SEC, Securities and Exchange Commission, felt like it was safer for these exchange traded funds to only be able to own Bitcoin futures versus Bitcoin itself is beyond me. When you have a futures contract, you have to understand the difference between a futures contract and what Bitcoin is selling for on the spot right now. You know when you're in the business, let's say you're a jeweler and your entire business, like I watched HSN and QVC go through this a lot. A lot of their products that they were selling were jewelry and they were based on gold and they made it themselves. But if the price of gold was going to go up in the future, they wanted to know that they could buy that gold at a specific price within a specific period of time. So, if gold was $1,000 an ounce and they were pricing their jewelry that they were selling on QVC or HSN, at let's just say $1,000 an ounce manufacturing cost. They needed to know that they could buy that gold at $1,000 sometime in the future, even if gold was selling at $2,000 and so they would purchase future contracts on gold. But if gold went down or if gold stayed the same and the contract was up because it's limited by time. They had to purchase it all over again. And that is what is going on in this new Bitcoin ETF, you're buying the future price of Bitcoin. So, it does not follow Bitcoin directly. You know there's another ETF out there called USO, they are an oil ETF. But they do it with futures contracts as well and so a lot of the times when oil was going up, that thing was going down. It's not like you think, so if you really want to buy Bitcoin you want to buy it what's called spot prices. What can you get it right now if you bought it right now? So, if you bought gold right now what is the spot price of gold right now. If you bought a futures contract on gold, you would have to pay more for it because you're also paying for protection and time value. Now I don't know if you're understanding that or not but you should because there's a cost to it every time a futures contract expires they have to buy another one which costs money. When you buy Bitcoin in its own, if you just want to keep it. There is not any additional fees for you to buy another contract or anything you just own Bitcoin. So, you want to go for the real thing if you want to invest in a Cryptocurrency, you want to own the actual commodity or currency itself. So, the best way to do that really everybody and I've been through this so many times with you is through either Paypal, Coinbase, FTX, or if you want to do your own wallet or whatever, okay. But, really if you wanted to do it that way you can now a lot of you are afraid because you see oh my God Bitcoin is just so expensive. You know Bitcoin is in the $60,000 for a Bitcoin. I have $60,000 to buy a Bitcoin, you don't have to buy $60,000 worth. You know I have a niece who wanted to buy Ethereum, who wanted to buy something else and she bought like $35 worth of one of the cryptocurrencies. You can invest less in a Bitcoin account at one of those firms I mentioned then buying a share of the Bitcoin ETF. So, I don't want you to go oh my God it's so much cheaper, I'm just going to do it that way. No, you're not going to make as much money if you do it that way than if you simply bought the Bitcoin or whatever Cryptocurrency you want directly. Now what's important to know is, I still think you have to be careful when it comes to any Cryptocurrency at this point in time and the reason that I think that is because you never know what the future will bring. It has not been around long enough for us to see, is the government going to regulate it. What is China going to do? We don't know, I still like cryptocurrencies a lot. However, I do not invest in cryptocurrencies with money, I cannot afford to lose and that is exactly how you should do it as well and if you cannot afford to lose money, again I am reiterating do a series I bond. Nothing wrong with making 7% for the first six months or whatever it's going to be starting November 1st. There are starting to be alternatives out there with inflation going up that maybe we'll meet your needs. But it's so interesting that so many of you have this fear of missing out. Oh my God you just saw Bitcoin go from $40,000 to $66,000 down to $60,000 and you don't know what to do when you get all famooshed and that's when you start to make serious mistakes. So, I'm asking all of you when it comes to Cryptocurrency, stop watching it every day. Stop looking because if you watch the ups and downs of all your stocks, your cryptocurrencies and you watch them every day. If these are investments that are meant for the long term, you are going to drive yourself crazy, number one. You're going to sell at the wrong time, you're going to buy at the wrong time and therefore your money won't do that what your money needs to do. So, I just wanted to hopefully make that clearer because again many of you are confused. But I can tell you bottom line here, would I myself by the pro shares Bitcoin strategy ETF? Not in a million years and in my opinion neither should you got that. All right, that was a little Suze school today but I didn't want to overload you sometimes I'm afraid I just overload you. KT always says Suze, can you just make everything simple? And I'm like, KT, I'm trying. But I do just want to tell you things that I think really in the long run will help you. I think you need to know you're going to get more on your social security check. I think you need to know that series I bonds, you should wait until November 1st. I think you need to know that you should stay away from pro shares Bitcoin strategy ETF. I think you need to know those things because chances are, maybe you don't. So, until Thursday there's really only one thing that matters and it is this, we want you to stay safe, strong and most of all secure. Take care.

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