The phase space obtained using Isospin Quantum Molecular Dynamical (IQMD) Model is analyzed by applying the binding energy cut in the most commonly and widely used secondary cluster recognization algorithm. In addition, for the present study, the energy contribution from momentum dependent and symmetry potentials is also included during the calculation of total binding energy, which was absent in clusterization algorithms used earlier.The stability of fragments and isospin effects are explored by using the new clusterization algorithm. The findings are summarized as follow: (1) It identifies the fragments at quite early time. (2) It is more sensitive for free nucleons and light charged particles compared to intermediate mass fragments, which results in the enhanced (reduced) production of free nucleons (LCPs). (3) It has affected the yield of isospin sensitive observables neutrons (n), protons (p), 3 H, 3 He and single ratio [R(n/p)] to a greater extent in mid-rapidity and low kinetic energy region. In conclusion, the induction of binding energy cut in the clusterization algorithm is found to play a crucial role in the study of isospin physics. This study will give another direction for the determination of symmetry energy in heavy-ion collisions at intermediate energies.