super low mortgage rates with the mortgage rates dropping you're probably
wondering should I go and refinance is it a good idea what are the pros and
cons so in this video we're gonna go and expand and dive upon is it a good idea
to refinance right now with the mortgage rates dropping what are the consequences
and I'll share why you probably don't want to refinance but instead I have
another strategy for you guys that would actually save you more money in the long
haul and get to pay off your mortgage even quicker hey what's going guys this
is Sam Kwak here one of the Kwak brothers and as you know the mortgage
rates are dropping very very low and some may argue that we've hit the lowest
point in the history when it comes to mortgage rates and refinance rates and
thus you're probably wondering should I go and refinance my mortgage to a lower
rate but in this video I'm gonna show you exactly why you want to reconsider
refinancing even to a lower rate and I'll show exactly why you might actually
end up paying more when you refinance and why could hurt you in the long term
but before we do please subscribe to our channel if you want to learn more about
paying off your mortgage faster or saving money on interest as well as
investing in real estate so as we've all noticed the mortgage rates have been
dropping and you might be considering refinancing right now so I'm going to
show exactly what happens if you refinance your existing mortgage on your
home so I want to begin by drawing out what's called an amortization chart now
this chart is a relationship between how many years you spend on paying off your
mortgage so typically right now most people get a 30-year mortgage okay so
right here represents the end of your mortgage term and this right here
represents the beginning of your mortgage so if you just got your
mortgage today you're gonna be right here at 0 year mark now this vertical
line represents the amount of your monthly payment for your mortgage so
let's say for the sake of this example your monthly payment on your mortgage is
thousand dollars a month nice and even right now out of the thousand dollar
monthly payment for your mortgage a portion of it goes to your interest and
the other portion goes to principal now on the earlier parts of your mortgage
vast majority of your monthly payment goes to paying the interest not the
principal so this red line that I'm drawing here represents
amount of interest that you'll play over time over the period 30 years now this
blue line actually label that as interest and this blue line here
represents the approximate portion of your monthly payment for principal so as
you can see vast majority of your monthly payment towards the beginning
part of your mortgage is going towards interest so this is just an estimate
based on maybe three to five percent your interest rate on your mortgage so
on that thousand dollars probably eight hundred dollars of that is going towards
interest and only about 200 of it is going towards the principal payment that
actually reduces the loan amount so you can see here that if you just refinance
or you just got your mortgage vast majority of the payment that you're
making to the bank is going towards interest at the moment it is only when
you get to bounce a fifteen to thirty year mark the second half of your
30-year mortgage is when you actually start to pay the loan down the principal
portion of your mortgage which is what you want at the end of the day the more
principal you pay off the more equity that you build a more net worth you
build for your property and also pain down your principal and your mortgage
could also mean you know more breathing room to go and smash the like button on
this video for our YouTube algorithm now the problem is if you've made it to
about this part here maybe seven to ten year mark let's say you've been making
your payments faithfully for the last seven or ten years well the problem is
you made it this far into the amortization where you're starting to
make more payments on the principal but the problem is if you refinance even at
a lower rate you have to start all over from the beginning of the amortization
schedules where vast of your monthly payment is going towards the interest
not the principal so even if you were to refinance at a lower rate you would
start all lowered in the beginning of the amortization schedule now this
portion right here guys we're vast of your monthly payment is going towards
the interest it's called a front loaded interest element because all the
interest is loaded in the front of your mortgage the beginning part of your
mortgage now you might be saying Sam what if I refinance into a twenty five
year or 20-year term where I'm resuming my Emmas Asian progress or even so
you're still gonna go to the front load as int resume because the way that the
amortization mathematics works is that you're always going to be
paying more interest towards the earlier part of your mortgage than you are in
the latter part of your mortgage so in all reality if you are considering
refinancing right now do consider the fact that you're gonna restart all over
for the beginning of the amortization schedule if it choose to go and
refinance so you're probably better off staying at where you are if you made it
to seven to ten year mark on your mortgage because as you continue to make
that payment you're picking up more principal along the line which means
again more equity and more net worth you're building and if that's not a
reason enough for you to reconsider refinancing you also have to pay closing
costs that are associated with refinancing the mortgage so closing
costs like administrative fees appraisal fees underwriting fees title fees
there's so many different fees that are associated with refinancing just so that
you can go and recycle back into the front part of your mortgage amortization
schedule so and many times I interview homeowners that just recently refinance
and they're paying a closing cost of anywhere between three thousand to ten
thousand dollars just so that they can get a lower rate but unfortunate they
didn't quite understand that they're gonna be starting all over back into the
front loaded interest zone to the beginning of the amortization schedule
like I've drawn out right here so bottom line you might be asking Sam what can we
do to save money on our interest how can we pay off our mortgage faster right so
I do have another strategy where involves not refinancing and allows you
to pay off your mortgage faster it allows you to potentially save a lot of
money on interest and gives you flexibility as well as a safety net in
cases a recession or you lose your job or your income goes down so I'm gonna go
and point you guys to another video that I made that show exactly how this
strategy works how fast you can pay off your mortgage and how much money you can
potentially save using this very strategy and like I mentioned this
strategy can actually help you during a recessionary times or maybe we see
another corona virus pandemic where your income goes down or you completely lose
your income this strategy can actually provide you safety net as well as some
flexibility in case something bad would have happened to the economy so that
video is down below in the video description below and I'm also gonna
leave that in the comments section so that you can go and click on it's
another YouTube video and I'm gonna explain exactly how the strategy works
so definitely go and check out that video we're gonna explain the strategy
how it can pay off your mortgage faster save money and give you flexibility and
there's some people as you can see the screen that used this strategy to
pay off their mortgage of him faster so definitely go and check out the video
where you don't have to refinance go back to the front loader interest own
and start all over again with the Allen ization schedule so don't get easily
fooled by the lower interest rate and jump right into refinancing do consider
the repercussion and the consequences of refinancing your existing mortgage
because as you can see it may cost you even more money over time if you choose
to go and refinance into another 30-year mortgage so like I said for the
millionth times go and check out the video where I explain the strategy and
paying down your mortgage I'll see you guys over there in the video