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Mortgage-Refinance
When Refinancing In Not The Right Choice
By Thomas A. Martucci | On December
21, 2006 | In Mortgage-Refinance |
Three Reasons Why Not to Re-Mortgage
The market for re-financing has been booming. How
can there be any reason not to re-mortgage as long
as the interest rate stays relatively low? We have
identified 3 reasons why not to re-finance. Our
reasons are based on logical, long-term financial
budgeting decisions that will bring “Financial Peace
of Mind” and help you to achieve financial
flexibility.
1) Re-finance to pay of credit card debt. We are
constantly bombarded with the logic of this, but
what good is it to take money from the equity in
your home (equity is like a retirement savings),
which increases your mortgage, when the majority of
people will begin to carry a credit card balance
within 3 months? 72% of people we surveyed had new
credit card balances over $1,000 being carried from
month to month.
Of course the concept of paying off high interest
non-taxable debt and replacing it with low interest
tax-deductible debt is great. However, you need the
desire, dedication and discipline to not use your
credit cards and carry a balance. Are you sure you
can do this?
2) Re-finance without a financial plan. When it
comes to re-mortgaging, so many of us see that we
can take money out and still have virtually the same
mortgage payment. Yes, you may have a specific use
for the money (i.e. paying off credit cards, buying
a new car, etc.) and a little left over for a
vacation or new wardrobe. Before you jump into this
with both feet, sit down and determine why you
really need the money. Do you have a written
spending plan? When writing down where the money
will go, you are more likely to rule things out and
need less money. You will borrow less and therefore
spend less.
3) Re-finance when you are looking for a lower
payment. If you want to take advantage of lower
interest rates by all means do so. This extra money
($100-200/month) should have a dedicated place to
go. It could go to your savings account, your rainy
day fund or towards paying off credit card debt. You
need to be disciplined about not letting this money
slip away. The best way to do this is with a family
budget and the BUDGETkeeper SYSTEM.
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