Let me explain why you might not want to get a home equity line of credit: I will use my friend Nadia as an example. Nadia bought her house in sunny Florida early 1998. She got a 30 years fixed interest loan and her monthly mortgage is $732, including property taxes.

In those days in 1998 the gas prices was just about to break the $1 per gallon but you could still get gas for 95 cents per galloon. Compare with today’s prices of $3.00 per gallon!

My neighbor took out a line of credit and had an in-ground pool put in his back yard for $11,000. I recently looked into getting a pool also, and the very same pool will cost $20,000 today.

Prices on food has gone up, on clothes, on school supplies, appliances, almost everything has gone up in price, but my friend Nadia still pay the same mortgage: $732 per month.

Now, her paycheck has gone up also, but just barely enough to cover all the higher prices mentioned above.

Nadia is pretty lucky though. Not only have she paid off on her loan as she should and created equity in her house, but the Florida home market have sky rocketed and today her house is worth three times as much as it was when she bought it in 1998.

Cool, that means that she is well off and have lots of money, right? Well, I wouldn’t put it that way. Nadia is wealthy in assets on the paper, but she hardly has anything leftover to spend when her monthly bills are paid. She really could use some extra money and decided to make some of the “paper money” available. She went to http://www.homeequityrefinancing.net to apply online for a home equity line of credit. After applying, she found their online mortgage calculator and added the numbers she had estimated for the line of credit and this is where she realized that she really couldn’t afford to go through with her plans.

Now, how can that be possible? After all, it is her house and her equity? Correct! It is her house but the money just won’t be available for her, before she is actually selling the house. If she sells her house and buy another house for the same cost as she paid for her house in 98, then she will get a lot of money in her bank account. The line of credit doesn’t make the money available for you! The line of credit is simply another loan and a home equity line of credit is just a loan where you put your house in as a guarantee for the payment. Another loan - another payment. Nadia could not afford another payment in top of her existing mortgage. She didn’t waste her time applying for a line of credit though. When she was contacted by the lender regarding her application, she explained her situation. The lender looked into her mortgage and realized that the interest rate was several percent lower now and suggested that she should get her house refinanced instead.

Nadia refinanced and got a new mortgage with the lower interest rate and lower monthly payment.

The author of this article is the owner and financial adviser for http://www.homeequityrefinancing.net