Pod Insights The Clark Howard Podcast 12.10.24 What Is Mortgage Recasting? / Fast Food Innovations About this episode Today, Mortgage Recasting 101. Clark explains how this type of payment works, when it might be appropriate, and mortgage recasting vs principal prepayment. Also, many fast food restaurants are innovating through apps, AI - and a whole new era of vending machines. Mortgage Recasting: Segment 1 Ask Clark: Segment 2 Fast Food Innovations: Segment 3 Ask Clark: Segment 4 Mentioned on the show: Mortgage recasting: What it is and how it works Submit a complaint | Consumer Financial Protection Bureau Is a HELOC a Good Idea? The Simple Answer HELOC vs. Home Equity Loan: Similarities and Differences Home Equity Loan Calculator - Clark Howard Should I Purchase a Prepaid Funeral Plan? Clark Howard's Important Advice on Funeral Planning Low-Cost Cremation Services: 5 Things to Know Clark.com resources Episode transcripts Community. Clark.com Clark.com daily money newsletter Consumer Action Center Free Helpline: 636-492-5275 Learn more about your ad choices: megaphone.fm/adchoices Learn more about your ad choices. Visit megaphone.fm/adchoices
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0:41 Speaker 01 Your sausage McMuffin with egg didn't change. Your receipt did. The sausage McMuffin with egg extra value meal includes a hash brown and a small coffee for just $5. Only at McDonald's for a limited time.
0:53 Speaker 02 Price and participation may vary. Promotion pricing may be lower than meal pricing.
1:01 Speaker 03 It's my pleasure to welcome you here to the Clark Howard Show. You know, our mission is to serve you with advice and information that empowers you so you make better financial decisions in your life. In this episode, I've been getting lots and lots of questions about something that was a term no one ever asked me about, mortgage recasting. And so I'm going to give you the basics on what it would do for you good and not so good. And also, I talked the other day about how automation and AI and all that in restaurants
1:44 Speaker 03 was actually not hurting employment. There were really good things about it. So I already stepped into it. So I'm going to step even further into it. And I'm going to talk about the new wave of, for lack of a better term, vending machines that are popping up all over the place that are giving access to healthy food, fast food, unhealthy food, desserts, you name it, all over the place that are showing enormous convenience for you and me as consumers.
2:22 Speaker 03 Right now, though, I gotta talk about something that has been a conundrum for people. We've got a big slice of homeowners with mortgages that are in mortgage lock. You're in a home that you bought through the cycle of the artificially manipulated ultra-low mortgage rates that we had after the banking scandals, and you're in a loan that the luckiest among us, you have a rate that starts with a 1, a more common, a 2, 3, or 4. And today, the interest rates are 7 plus or minus.
3:05 Speaker 03 So, the burden, the carry cost of those loans is so high and way outstrips current inflation. So, you're talking about a huge premium over the nation's inflation rate at 2-point-whatever now. So, let's say you're paying 7%, and you're lucky enough to get a big end-of-the-year bonus from work. So, something that became a thing a year ago is a term people hadn't talked about to me in forever. It's called a mortgage recast. It's not a refi, it's a recast. So, we're still stuck at these higher rates, and the payments may be causing people to
3:49 Speaker 03 wheeze. And so, what a recast does, and most loans permit it, not all loans, you take that end-of-year bonus, or if you unfortunately lose a loved one and you get an inheritance, and you throw it at the balance of that mortgage. And when you put that against the balance, they recast the mortgage, keeping it the same length of term. So, let's say you have 28 years left. You stay on a 28-year loan, but you now have a lower balance. So they recalculate it, or recast that for the remaining 28 years, your mortgage payment is now lower because it's on a lower balance.
4:33 Speaker 03 So you're not shortening the length of your loan. You're still going to pay the ugly current interest rate, but you have less obligation every month. So there are people who, who maybe work in sales, or the company they worked for had a great year, and you get this bonus, or you have the loss of the loved one, or you win a lottery, or who knows what. And you take that money, and you create more breathing space every month in your mortgage. So that's what a recast does. My preference, if you're able, right now, to handle your mortgage payment, you're able to do it, and you get that bonus, you throw it at the principal of your loan, all in a lump sum.
5:18 Speaker 03 So you do a principal prepayment. What that does is your mortgage balance goes down. Your monthly payment stays the same, but you end up paying far less interest, and your loan is done far sooner because you prepaid a big part of the principal. And then, moving forward, yeah, you're still making the same payment, but much more of every payment is now going towards principal instead of interest. So the two scenarios. One, you're wheezing from your monthly payment. See if you can do the recast. But otherwise, if you're carrying a current market rate interest about 7%,
6:03 Speaker 03 prepay because your return on your money is a 7% guaranteed return, which is great. By the way, make sure your lender doesn't cheat you, like some banks will try to do. And they treat it as you prepaying monthly payments instead of a prepayment of principal. Make sure that you check online that they applied it as a prepayment of principal. If the lender is trying to cheat you, you immediately file a complaint at consumerfinance.gov before you even make the first phone call to the bank that's cheating you.
6:43 Speaker 04 Okay, Matthew in Florida wrote in with this. We have several hundred thousand dollars in home equity. Our credit is excellent, above 800 for both of us. However, we have very little money in our savings account. We're approaching a time where we may want to work with several vendors to get the exterior of our home painted, the stone on the outside refurbished, new carpets, and a backsplash for the kitchen to maintain our investment in our home. We know nothing about home equity loans. Would that be something you'd recommend for financing this work?
7:11 Speaker 03 Okay, first of all, congratulations on your very high credit score and having so much equity in the home. So the answer to your question depends with the number of things you said, getting the whole house painted, getting it refurbished, new carpets, doing some work in the kitchen. You're talking about a fair amount of work. So the key trigger is how long will it take you to pay off those improvements that you would do that you would borrow money for? If you tell me, oh, you know, we'll pay it off in the next three or four years, you want to do a home equity line of credit, a floating rate loan that
7:54 Speaker 03 the financial institution extends to you. Credit unions are best for this. You got that floating rate. It's up to you to pay that down on that timely basis to get it paid off in three or four years. If you're saying like, yeah, like we could pay it down in that time, and you're looking at five years or more, then you look at a different product that most often the best deals far and away are with credit unions, and that is a home equity loan. These tend to come in three flavors, a five-year loan, a 10-year loan, or a 15. By far, the most favorite conditions for those loans are on five-year.
8:39 Speaker 03 The ugliest conditions are 15-year because the risk to the lender escalates so much. My goal for you, Matthew, would be for you to be able to take out that five-year home equity loan at a fixed rate and pay it back in 60 payments, and you're done with paying off those improvements.
9:00 Speaker 04 David in Minnesota says, "I could use your advice regarding whether I should work on paying my mortgage off early or put extra money into my retirement accounts, a Roth IRA and an inherited Roth IRA. My mortgage is at 2.99%. I owe about $239,000, and the house is probably worth about $360,000. I don't have a ton of extra money, but I have been able to send a few hundred dollars extra to principal for several months now. I'm 63 and plan to retire at 67. Other than the mortgage, I have zero debt."
9:30 Speaker 03 David, everything you said says, "Put the money towards a Roth IRA." Everything you said. Your age, that you don't have enough money in funds for retirement, your whole emphasis should not be prepaying on a mortgage at 2.99%. It needs to be on building up money in that Roth IRA that will grow tax-free. When you need it, you spend it tax-free. That is the highest priority, and stop prepaying on the mortgage.
10:08 Speaker 04 David in Oklahoma says, "I consistently check my credit scores across my three different cards. They always have different scores, like pulling from a different credit company, I assume, but it's always well above 800. We recently applied for a mortgage and got the standard letter in the mail where they have to tell you where they got your score from. I was shocked to see the scores came back as 757, 774, and 786. How is there such a difference between what the lender says and what my credit cards say each month?"
10:35 Speaker 03 Okay, this is going to freak you out, David. Just as you found out when you check your credit scores that the credit card companies pull... And they're all different, but they're all in the 800s. And then you look at the mortgage credit report. The scores, I don't know why, but they're historically consistently lower than the ones the credit card companies pull. And they're all three different. And there's a significant difference between 757 and 786. Your blended is going to be above 760s. You have no problem getting the very best loan rates.
11:18 Speaker 03 But this is a specialty credit report using a little bit different scoring model for mortgages. And then of course, the 757 is that credit bureau has different information on it than the credit bureau that generated a FICO, a mortgage FICO 786. So that's the deal. That's what happens. And the good news is because you have managed your credit so well, so wisely, you're going to be just fine. And that's the great news. And I hope that mortgage rates decline steadily so that you're in a position to get a rate
12:01 Speaker 03 that at least the first digit is a six. And I still believe that in 25, we're going to see 15-year loans with the first digit being in the fives. Coming up ahead, I'm really excited about something, about being able to get meals ready to eat from what seem like, kind of like, modern fancy dancy vending machines.
12:31 Speaker 01 Your sausage McMuffin with egg didn't change. Your receipt did. The sausage McMuffin with egg extra value meal includes a hash brown and a small coffee for just $5, only at McDonald's for a limited time.
12:43 Speaker 02 Pricing participation may vary. Promotion pricing may be lower than meal pricing.
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14:17 Speaker 03 So I know that I have screws loose because I'm so excited about what I'm about to talk about and it's all the new machines that give you the ability at all different kinds of places to get fresh food around the clock and where it's convenient for you. It's happening at companies. It's happening along road sides. It's certainly happening in airports. And I read so many of the various travel blogs and there's obsession in the travel industry about farmer's fridge. Farmer's fridge, there are now thousands of these installed in all different kinds of
15:02 Speaker 03 places way beyond just airports. I was in a hotel recently that had a farmer's fridge. What these are is it's all healthy food, fresh, available to you.
15:18 Speaker 03 The meals are not cheap, but it also eliminates that problem. Let's say a traveler running from gate to gate in a hub airport and you're hungry. And in the past, what did a vending machine mean? It meant chips, it meant cookies, it meant candy bars and soft drinks, right? Wrong. Now you're going to have things like a farmer's fridge and you're going to get really fresh, good for you food. I'm talking about this like I've been getting food out of a farmer's fridge. I'm not because I was in, um, what airport was I in recently? And I was like, you know, I should really try this thing.
16:02 Speaker 03 And I go over to it and I'm looking at the meals and they looked really good. I mean, really fresh, like it says, high quality ingredients and healthy stuff. It was so expensive. Forget it, I didn't get, but it is part of a wave of change that the technology now exists. Machines that will, I think I talked before about the ones that make Asian food are popping up around that you order it and then it makes the Asian food right there, right before your eyes in just a couple of minutes. The pizza machines that do this.
16:45 Speaker 03 Now machines that make a fresh cooked hamburger for you while you wait and I think it's three or four minutes. I mean, this is such a change to be able to get, you know, Italian food or various ethnic foods from around the world or healthy foods or for people like me, unhealthy foods like a burger or a pizza out of a machine made fresh, popped out.
17:14 Speaker 03 That talk before Krista about my son Grant getting the pizza from one of these robotic machines and that the pizza was so bad that even a teenager wouldn't eat it.
17:25 Speaker 04 That's pretty bad.
17:26 Speaker 03 So that was, that was one that was an opposite example. What do you think? You love to eat healthy and you'll spend money. Will you try one of these Farmer's Fresh?
17:37 Speaker 04 Sure.
17:37 Speaker 03 In an airport and report back?
17:39 Speaker 04 I will definitely try it. I also like, ever since I watched the Jetsons as a kid, you know, they had that in-home thing that would cook the dinners.
17:47 Speaker 03 Rosie would go over and she'd push the buttons.
17:49 Speaker 04 Yeah.
17:49 Speaker 03 And she'd be exhausted from cooking and.
17:51 Speaker 04 Well, no, Jane would push the buttons, right? Rosie was the robot who cleaned and everything, but there was like a food machine. And so I would love to have that in my home.
18:02 Speaker 04 That would be great. Okay. Dwayne in North Carolina has a question, actually related here, Clark. Curious if you have an opinion on the issue of Bojangles Chicken and Biscuit Fast Food phone app that charges you 50 cents every time you place an order. I did complain to the company with no reply and now I've deleted the app off of my phone. My family enjoys their food, but it's outrageous in my opinion.
18:25 Speaker 03 What's outrageous is I can't have a Bojangles sausage, egg and cheese biscuit anymore because I can't have high sodium foods anymore because of my heart valve replacement.
18:37 Speaker 04 I'm sorry.
18:37 Speaker 03 You don't think that's an outrage?
18:39 Speaker 04 Not really, but you know, of all the outrages we hear about, I don't know.
18:43 Speaker 03 So this has been floating around on the internet for a while. You tipped me off that you wanted to ask me about this. So I downloaded the app. I can't find the 50 cent fee.
18:54 Speaker 04 Yeah. So people were, some people have posted receipts online where it was like a pickup order and there was a 50 cent service charge. So I tried a few different states on their website, which is also like the app for pickup. And I didn't see any.
19:06 Speaker 03 Wow, you didn't mess around on checking this out, did you?
19:09 Speaker 04 So, but it could be that maybe in Dwayne's in North Carolina, which I didn't check, or maybe the local franchise is charging it.
19:18 Speaker 03 Completely backwards because people using the app saves the restaurateur so much money.
19:25 Speaker 03 That to charge a fee, if it really is true, and there are people on Reddit and stuff saying, what are they doing, charging me a 50 cent fee?
19:33 Speaker 04 Yep.
19:33 Speaker 03 You know what I love about that?
19:35 Speaker 04 What?
19:36 Speaker 03 People are looking at their receipts.
19:38 Speaker 04 Yes, yeah, and maybe they have stopped now. Maybe they've heard what people said.
19:42 Speaker 03 Yeah, they stopped doing it.
19:44 Speaker 04 Okay. I've never eaten at a Bojangles. Sorry. I'm missing out, Clark.
19:51 Speaker 03 Krista, I mean, you've not lived a full life.
19:55 Speaker 04 I'm sorry.
19:55 Speaker 03 You haven't eaten southern bad for you food.
19:58 Speaker 04 I still haven't been to Buc-Ee's.
20:01 Speaker 03 Wait a minute. Wait a minute, they have Tesla, you're a Tesla driver.
20:06 Speaker 04 We talked about this.
20:06 Speaker 03 They've got the ultra fast chargers.
20:08 Speaker 04 We're supposed to take a road trip, you and I are supposed to go to Buc-Ee's. We need to do that and put it on YouTube.
20:14 Speaker 03 Do we have to finish the podcast? Should we just go right now?
20:18 Speaker 04 Okay, Tony in Georgia says, how does one properly evaluate the services and risks of prepaid cremation services? Like the Neptune Society and others like them. I put that right after your sausage, egg and biscuit comment.
20:32 Speaker 03 Sausage and cheese.
20:34 Speaker 04 I didn't do that on purpose. Yeah.
20:37 Speaker 03 Yeah, you should see the sodium count. Oh, man. Anyway, Tony, um, the advantage of prepaying in advance for a cremation is that your loved ones, at the time of stress and sadness, don't have to deal with it, don't have to make decisions. One of the biggest risks, though, with the prepayment is a lot of times people go to their death, never having told the loved ones that need to know, hey, I took care of all this. It's already done. Uh, here's the information you need. Make sure that if you ever do prepay for arrangements for a cremation,
21:21 Speaker 03 that you have informed everybody who needs to know.
21:26 Speaker 04 Put it in your will.
21:27 Speaker 03 No, that doesn't help.
21:28 Speaker 04 Oh.
21:29 Speaker 03 By the time the wills, uh, read, your way, they already did the opposite of what you wanted.
21:36 Speaker 04 Oh, yeah.
21:37 Speaker 03 And put you in some cemetery plot or something like that and buried you.
21:41 Speaker 04 That would be really bad. Then you read the will and you're like, oh, man. That's bad.
21:47 Speaker 03 Well, so that's why you make sure if you do. Do any kind of prepaid arrangements that you have informed all the key people so they know. And they're not going to appreciate it at the time because they're like, I don't want to think about and talk about you dying. We're all going to die, so just listen to the briefing you're going to get from somebody about this. Second, if you know you're stationary in the part of the country you live in and you sign up for something often, it's going to be something local or regional, then you're okay. But often we end up, you know, much later in life, when we do pass away, we're living
22:29 Speaker 03 in a completely different part of the country and the service may not even be available there that you prepaid for. What you can know is that if you've well briefed your loved ones and they know you want to be cremated, either through a nonprofit memorial society, funeral memorial society, there may be deals available to you. Or you can shop around on the internet at time of death and often the rates you'll find shopping around will be lower than what you might have been able to prepay for. The odd thing when arrangements are made at time of someone's death, people pay crazy amounts too much or very little amounts.
23:14 Speaker 03 If you know that you'd be too emotional or your loved ones would be too emotional, they wouldn't be able to think clearly. You know you're going to live in one particular area for the rest of your days and you want to prepay for a cremation, go ahead, but shop around for the price.
23:33 Speaker 04 And then when you also were going to donate your body to science, you went through a university, right? That's another thing.
23:39 Speaker 03 Yeah, so my deal, I don't want my family to have to pay for even cremation for me. And I want to be able to have whatever parts of my body would be useful organ donations to be donated. And then usually your body's disposed of for free, cremated for free. And so it's a twofer. I'm able to have somebody else benefit from, they want my four eyes.
24:06 Speaker 03 My eyeballs or whatever it is they want. I want them to have vital organs, whatever, so that they can have the gift of life moving forward. There are people for religious reasons who don't believe in that, who believe it's a sacrilege. I don't share those beliefs and I wish more of my fellow Americans would set up organ donation wishes so that other people will have the gift of life.
24:33 Speaker 04 Then beyond that, isn't it going to medical school?
24:36 Speaker 03 No, I'm too, I think I'm too old now for anybody to want.
24:40 Speaker 04 That is an option.
24:41 Speaker 03 Yeah, for many people, if you donate to a university-based medical center, you know, a medical school, hospital, often they need cadavers to teach the students. And I'd be happy to be one of the dummies they
24:58 Speaker 04 Me too.
24:59 Speaker 03 They learn on.
25:00 Speaker 04 Me too. I know we're making light of this, but you know, like you said, it's gonna happen to all of us. We have to talk about it.
25:04 Speaker 03 It's gonna happen. I don't know anybody who thinks they're immortal, except people that are legends in their own mind, right?
25:11 Speaker 04 All right. Ron in North Carolina says, "My wife and I are retired and own our single-family home in Cary, North Carolina. Our home has appreciated 75% since we bought it eight years ago."
25:22 Speaker 03 Wow.
25:23 Speaker 04 "We are considering selling our home and moving to an independent living home in a new retirement community in Colorado Springs. How will a home in a retirement community appreciate compared to our current home? And will we, or the owner of the retirement community, reap the appreciation of the home? From an economic perspective, would it be wise to stay in our current home for as long as possible?"
25:45 Speaker 03 So Ron, this is really your call and you know what Cary, North Carolina is, right?
25:51 Speaker 04 Research Triangle.
25:52 Speaker 03 It's the containment area for relocated Yankees.
25:55 Speaker 04 I forgot.
25:56 Speaker 03 Anyway, people love living in Cary. They love living in that part of North Carolina. It's a wonderful quality of life. The question for you, Ron, is, do you really want to be in Colorado for retirement? Do you want to live in the Springs and you don't want to live in Cary anymore? That would be the decision. And if you go to Colorado, I'm going to tell you something that would be unpopular with you, potentially, for you and your wife. I would rather you not commit as a transplant to buying in a specific retirement
26:36 Speaker 03 community till you've really had a chance to test drive, living in Colorado Springs, and know that there can be a lot of snakes in the grass with buying in these retirement communities. It is very common that the expenses involved and all that, that it is a money-losing thing. You had enormous appreciation on this home in Cary, but moving into a retirement community often ends up being a money-losing equation, not a money-making one. So this is a decision you don't take lightly, and you take your time before you decide to buy in a community.
27:20 Speaker 03 Even if you were to buy in one in the Research Triangle area, you decided, you know what, we're going to stay in North Carolina, but we want to go into a retirement community. Even then, be very careful and mindful, because a lot of times also, health reasons, or maybe lifespan reasons, you have to sell, or your heirs have to sell that retirement community home, at a time that the market conditions are very unfavorable. So, take your time, do a lot of reading about, and look at it only from a negative perspective, just so you look at the things you wouldn't think about.
28:04 Speaker 03 You know, retirement community rip-offs is a search term, or something like that, and learn from the mistakes of others before you go down this path. And I hope that you, as you move into the phase of retirement in your life, I hope it's absolutely fantastic for you and your wife. And speaking of fantastic, I hope you have a fantastic rest of your day. If you are looking for solid, rock-solid advice for your wallet, go to Clark.com. I believe so much in the integrity, the thoroughness, and the ability to take the information
28:47 Speaker 03 you see, and put it to work in your life, that we do at Clark.com, is something that makes me so proud.
28:57 Speaker 03 to have my name on. So when you're looking for great information that you can act upon, we got it. Have a great day learning ways to save more, spend less, and avoid getting ripped off. And I'll be with you tomorrow.
29:19 Speaker 01 Your sausage McMuffin with egg didn't change. Your receipt did. The sausage McMuffin with egg extra value meal includes a hash brown and a small coffee for just $5. Only at McDonald's for a limited time.
29:31 Speaker 02 Price and participation may vary. Promotion pricing may be lower than meal pricing.
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