Real Estate the Ramsey Way - Is It Better to Refinance or Recast Our Mortgage?

Episode Date: December 1, 2025

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Dave Ramsey here and welcome to another episode of Real Estate, the Ramsey Way, where you'll learn how to make smart home decisions, avoid costly mistakes, and navigate home ownership with confidence. Emily is up in Dallas, Texas. Emily, how can we help today? Hi. I'm honored to speak to you all. Thank you.

My question is about, I know, interest rates just drop and are possibly expected to drop again soon. I'm curious. I would like to, we would like to refinance to a 15-year mortgage, but if rates don't drop below what we currently have, 5.75, would it make sense to recast at least and just be paying less in interest? Because we've put down an additional about 30 grand on our principal in the past couple of years. Way to go. And so you currently have a 5.75% rate on a 30-year? Yes.

Okay. Have you actually gotten a quote yet to see what it would be to get a 15 year? No, I haven't. Okay. I played around on calculators online. Yeah, and they can help. If you contact our friends at Church Hill Mortgage, they can run the numbers for you and show you what's called a break-even analysis to show you how long it will take you for this to make sense. Okay. You know, they might say, hey, you'll get a 5%, but it's going to cost you this to refinance.

So a year from now or two years from now, you will break even, and then it will begin to make sense. make sense. And the recast isn't going to do anything except lower your payment. It's going to keep the loan length and the terms, the interest rate. So the way the recast will work is you make that a big lump sum payment, they lower your payment down. But if you're following the Ramsey plan, you're knocking this mortgage out, it doesn't matter. If it lowers it 500, but you're throwing 500 extra versus a thousand dollar payment, the same amount as going to principal. Okay. So what is your goal right now, just to lower the payment or pay? it off faster?

Both. Yeah, we're newly in step 4, 5, and 6, and so I just stare at that mortgage payment all the time, and it just makes me mad how high the interest is versus principal. What's left on it? Just figuring out. 368. Okay. And are you guys in 4, 5, 6, where you're tackling the mortgage, throw an extra at it?

Yes. Okay. What's your track right now to pay it off early? I haven't really looked into that much. I kind of, I know I did something wrong. I was paying extra on the principal while we were in Baby Step 2 still, just because I hate how high it is. But now we're fully in 4, 5, 6 and just started contributing 15%. And so we've been paying, I've been paying $1,500 extra a month towards principal,

and we are three years into the mortgage. Okay. I'm so proud of you guys. You're making great progress. Yeah, the refinance can start to begin to make sense as these rates drop. And so I would just get in touch with our friends at Churchill Mortgage and see what the rates are currently at. On the 15 year, it's going to be lower than the 30 year in general. But again, based on the timing, who knows.

But hopefully if you can save at least a percent or more, I think the break even will start to look a lot better. So best of luck to you. All right, real quick, imagine a whiteboard here, George, behind us. This is what I wish we had right here in the studio, get a whiteboard out. You love a whiteboard. I do love a quick lesson. I want to make sure people understand this. mortgage rates if you're trying to see what the market's doing when jerome powell who is the

fed chair comes out and says we're going to lower the interest rate that does not mean that your mortgage rate moves with it all right so mortgage rates people who set the mortgage rates tend to follow the 10 year treasuries so the yield whatever the yield is on a 10 year treasury on our 10 year treasury is what you're going to see rates move so as of today the yield is flat, so you're going to see mortgage rates probably hold pretty steady to where they are. So I just wanted to, I want you to speak to that. I want people to make sure that when you see all the news, Jerome Powell and the Fed's meeting, everybody's paying attention, that does not have a direct, I mean, it can somehow, it's related, but it is not directly related.

And there's a lag to. There's generally a delay. It's not going to happen tomorrow. It might be 30 days, 60 days out. And it's important to also know a 15-year and 30-year mortgages, they also fall into different buckets. That's correct. In the industry, 15 years are seen as more of a short term versus 30 years or more long term. And so it follows different treasury yields. So you'll see that just because the 30 year rates move doesn't mean the 15s are going to move with it. That is correct. That's important to note too. But I wanted to just crunch some numbers. Oh, I like it. This will be fun. Like they said their home value. She said they have 368,000 left. Is that right? So we're going to just crunch some numbers here to show you what that would be like.

you know, let's see if we got the down payment. All right. So 15-year fixed with a rate of five and a half, you're looking at $3,900 bucks for a monthly payment. But if rates go down to, let's say, four and a half percent, it's $3,700. So it's about $200 in savings a month with a rate change like that. So if you could shave off 1% with that plus interest, you could save a lot of money over the length of that loan. But again, if you're following the Ramsey plan, you're attacking that mortgage with a vengeance, you're not going to get hit with as much interest. You know, when I pay you, paid off my mortgage. Instead of paying six figures in interest over the course of even that 15-year loan, we paid less than 10,000 because of us aggressively attacking it. Yeah. So, okay,

so play that out. So when people try to play that mathematics game, well, I'm not paying as much interest, but I'm also forking out a lot of cash. I'm playing devil's advocate here because I know you can handle that. But I mean, let's play that out. What's the response to that argument? Well, generally the thinking is, well, I have a low interest on my mortgage, therefore I'm going to keep my cash invested. Right. Now, the chances of you having the mortgage payoff amount sitting in a savings account slim to none. Right. So there's a false narrative.

Exactly. Now, go look at the amount you're actually paying an interest on what's called the amortization schedule. And you'll see that most of it is going towards interest in the beginning part of your loan. What's beautiful about the 15-year loan is that a lot more goes to principle, a whole lot faster. So you're making way more progress, way faster when you do the 15-year fixed-rate mortgage. So that's a beauty of it. And plus, when you think about a 30-year loan, it's double the time, which means you're paying double the interest except a little bit more because generally 30-year interest rates are going to be higher than the 15.

So a lot of nerdery there. I love it. Trivia question 40 related to this topic. Uh-oh. Okay. Question, and then I'm going to make a statement. Question is, what do you think the new average age in America is for a first-time homebuyer? What do you think it is?

I'm going 32. It is 38. Wow. 38 years of age. Now, before we go doom and gloom, I was thinking about this. I heard this this morning. This is fresh. It's fresh.

I can tell. Like the hot now sign of Krispy Kreme. I mean, I heard it this morning. I love fresh data. I'm sitting there listening to my car and I go, you know what? Ramsey, our new crusade ought to be just if we could abolish anything, it would be student loans. Yes. I got to believe that student loans are, if not the primary factor, a major factor.

as to why we're seeing that age of the first time homebuyer jump up. Do you agree or disagree? 100%. Think about this. If you were debt-free out of college making a good salary and even had some savings in the bank, you could buy a home the Ramsey Way in your mid-20s, which means by the time you're 40, the thing is paid off if you do it our way with a 15-year fixed, let alone getting into your first home. Oh, boy.

So I think the reason we're delayed, yes, the housing market, yes, the economy, but also crippling debt. That's what I think it is. Largely due to student loans. This is why I would get rid of the federal student loan program. Private students, I would abolish it altogether. I would actually make the universities raise their own money to pay for tuition. Let's go. Oh, boy, I'd change America, folks.

I think we'd see a big price drop when the government isn't backing all of these loans. Lots of good things would happen. Yes, sir. Can I should get on a ticket. Coleman Camel, 26. Who would vote? It's better than most options at this point. We'll win.

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To find a Ramsey trusted agent near you, go to Ramsey Solutions.com slash trusted agent. That's Ramsey Solutions.com slash trusted agent. Andrea is with us in Montana. Hi, Andrea. How are you? Hi. Hi, I'm good. Thanks for taking my call. Sure. What's up? So, quick question. Well, two quick questions. First.

I own two businesses. One is a mobile home park. And I also am in the Airbnb business. I own three Airbnbs. I do have some debts, obviously on the mobile home park, a truck and a side-by-side. Is it okay to use money from one business to pay down debt in another business? So we make about 150 through our three Airbnbs. And that's kind of slush money.

We use that for big projects around our house and whatnot. But our mobile home park, the loan on it in two years readjust. So we also want to pay down that balance as quickly as possible before we adjust. So is that a big new? no-no tax-wise and no tax difference all of it is taxed at your rate i assume these are all held in LLCs yeah they're two separate LLC yeah so you know what happens you know LLC don't pay taxes right yes whatever whatever the profit is and the LLC lands on your personal return that's where the taxes are paid LLC you file a tax return on the LLC you show the profit but there's no tax paid

then the profit then lands on your personal return and And that's where the tax is paid. So the point is it's all your money. Sure. So I can... You can move it around without any consequences whatsoever. You do whatever you want to do. Okay.

It's your money. Perfect. Now, how much do you owe on the mobile homes? Park? The mobile home park, I owe about $6.50. Okay. And you made $150 clear on the Airbnbs. Are those mortgaged as well?

No. Those houses that are Airbnbed are paid. for? Well, one is a guest house on our property. So, I mean, it just kind of is absorbed into what we know in our house. Gotcha. One is paid for. We just finished paying it off last year, and one has 40,000 left on it. Okay. All right. Pay the 40,000 off immediately. You probably got, you probably got that in checking. We will in a few months. Yeah, be done with it. All right. Now, then you're making 150 on Airbnb's. What's the profit on the mobile home part after bills are paid after after bills are paid about five grand and now

that includes we're we're reinvesting into the park and upgrading it um so sometimes we've got a slush of 5,000 sometimes we use it all five grand a month or you know 60,000 dollars a year you're making nothing on this why why in the world you have a 650,000 dollar mortgage on something that's only making 60 grand. That's horrible. Again, it's because we're putting money back into it. Well, $200,000. It has, no.

The thing ought to be cash flowing like a bandit. Yes. Mobile home parks print money. True. Now, it's not a big one. There's only 13 mobile homes. And it also has a four-bedroom house on it. somebody left that in absolute.

Okay, something's screwed up about your numbers, honey. I don't care. Still something screwed up about your numbers. You don't have a $650,000 mortgage on a mobile home park. It makes $60,000. That does not make sense. It literally should be making $300,000. Okay.

Something's wrong. Are your rents off or? You know what? Well, as a mobile home park, yes, some of our rents are pretty low. I mean, it's low-income housing. I know that. I said, are they not, but you're not charging. It's a trailer.

Of course it's lower income housing. You know what? Half of them, half of them we have redone and the rents are keeping up with the local economy. The other half. Okay. Here's what I want you to do because I can't figure it out on the radio here, okay? But I own several hundred million dollars for the real estate and I've looked at, I've owned mobile home. I've owned parks in the past.

I don't own anything like that right now. but I know the numbers on these things. So here's what I want you to do. If you did not own this mobile home park, I want you to back up and ask yourself this tonight and run the numbers, and you and you said, I've got the opportunity to buy this and go $650,000 in debt to buy this,

and I'm going to make $60,000 a year after doing that, would you buy it again? The answer should be no to that question, by the way. But if there's other things that you and I aren't connecting on where this money's going, inside this thing, which you seem to be alluding to, and there's a lot of money, I think, missing in this conversation. You need to look at this and say, you know, do I need to not be doing a bunch of this stuff and instead paying down this mortgage? Because the stinking

thing's going to reset, and I want you to pay it off. That's what I was working towards. I don't want you to pay it down. I want you pay it off. And if you're making $300 instead of $60, you could do that before it resets in two years by plowing it all into the mortgage instead of into improvements in the mobile home park. And that's what I think should be happening. But I'm, but I'm missing some money here because you can't find it in our conversation. It might not be there, but I think it should be. You should not have 650 invested in mobile homes that are going down in value and then only be cash flowing 60K.

That sucks if that's what's happening. You should sell that. If you can get someone else to buy it, you should sell it and get rid of it. Because that's a horrible ROI in that such horrendously bad investment. But if you're making 3 or 400 on the thing, somewhere in there, there's something I'm missing in these numbers, then, and you can get rid of this mortgage before it resets with the Airbnb money piled on there too. And I think you might be able to do that instead of fixing up the sidewalks or some kind of crap in the mobile home park, let's get rid of the mortgage.

And then we'll go back and do our improvements on the property, our capital improvements once we're debt-free and we've got real cash flow. That, I think, you might have this stuff out order. That's what I think is happening. But if you really are $650,000 in debt on depreciating losing value mobile homes and your only cash flowing 60, you've got a really bad deal and you need to get out of it if you can't. It sucks as an investment. Mobile home parks generally aren't that bad. They generally are cash money because I talked, Georgia and I talked to a lady earlier this week. Ken. The investing essentials of it? No, on the air here. She had 750 tenants, and of those, I think, 60 of them or 70 of them were in mobile homes that she paid 20 grand apiece for, and she was making bank.

Yeah, yeah. I mean, she was printing money off of that. And so that's what normally occurs. And so I think there's too many improvements here. She's alluded to that. She couldn't give a specific number. Too many redwood decks. Yeah, or something, I don't know what you're doing.

You're putting, giving them all a hot tub. I don't know what we're doing, but it's like, I don't know what's happening. But something's got to change. Anyway, that's the thing. So mobile homes, for those of you that are looking for something to live in, never do that because they go down in value. It's a car you sleep in financially. That's what it amounts to. And if your parade of homes is going down the highway, you might be a redneck.

I'm just saying. So seriously. And I love it. I'm not picking on you if you live in a mobile home. I'm telling you don't buy one to live in. They go down in value. Houses go up in value. the place where your sleep should be going up in value.

That's what you ought to purchase. If you're going to do an investment like she does, however, or the lady we talk to, she's got 20 grand apiece in them and the things are cash flowing. She's breaking even every 20 seconds on those things. And she can buy another, and if they, in five years are worth zero, she buys another 20,000 and throws it on the pile. And, you know, that's a different thing. You're cash flowing on a depreciating asset there.

But that makes, and that actually can make business sense. It's a pain in the butt to operate them. but it can actually make ROI business sense. So, wow. It's an interesting discussion, Andrea. Thank you for involving us in it. I'm sorry I wasn't more thorough, but that gives you some things to chew on it for y'all to think about.