Many people are looking to refinance their home as a means of pulling money from their rapidly rising real estate. The intent may be to reduce other debts, finance a vacation or maybe you're just looking at refinancing your home as a means of getting a better deal. But are all better deals good deals with looking at home refinacing options?
One of the best examples of a home refinancing option that is good for some and bad for others is the interest-only option mortgage. With this morgtage, you typically only pay interest on your loan for the first two years and then the morgtage usually restructures in the third year, with an interest change and a principal payment. This can seem like an attractive home refinance option, but look very closely at the real value you are receiving. Indicicators are that the housing market is pulling back. Is your home going to be worth more at the end of the interest-only term to let you cash out or sell and make a bundle, or are you going to be left holding the bag and desperately looking for a new option to refinance your home and keep control of your property? For others, the interest-only mortgage is a great option that allows people to position themselves in real estate and leverage their way into their dream home.
Always look at your home refinancing options and compare issues such as home equity vs refinance numbers to ensure that the money you're pulling out of the apparent value of your home today isn't going to receed if the housing market pulls back in your area. Nothing is worse that having a morgtage after a refinancing a home that is greater than your home's new worth on the open market. Also be sure that you have a plan for what you're going to do when the terms of the morgtage change. Are you going to refinance again or sell? Plan your options so you can set up the very best deal for the next round.
Be sure to look over all of the fees required for a home refinancing option and do a little math before making any decisions. Interview multiple loan brokers as well. Choose the one that you trust. An honest broker will not try to pressure you and will lay out the options and explain the numbers to you. If you're still not sure, spend a little money and take your home refinancing options to a CPA and get an opinion from someone who knows the numbers but isn't making any money on the choice you make. If you've found an honest broker, the CPA's answers will probably match very closely but also remember that each will look at things from different angles. A difference in opinion doesn't mean someone is being dishonest.
A home refinance can be a great option for the right situation. If you feel that it might be the right option for you, get the facts and and avoid a rash decision. It's your money and you deserve abundance.
Dave Saunders is a business consultant and published author.
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