Just a quick note about second mortgages and doing a home refinance.

This isn't about my life... yet. I do plan on evaluating the need for a refinance in my future, as I have in the past. But this post is about my sister and how she is looking at things in a slightly skewed perspective.

One of the things that I've done several times in the past to get things re-aligned is to refinance my house/houses. I've done this because it has always made sense at the time to do so. Ultimately each time I've refinanced, I have sunk a few thousand dollars into the new balance of the mortgage, but the math always worked out to the better side in the situation that I was in. I've never done this to get any money out of the house. I've always aimed towards a lower interest rate or a better set of terms... never to "cash out".

Just some advice for you - Do your math first.

When a mortgage company rolls the points into a loan, you are paying interest on those points. Do your math before you sign on the dotted line. When applying for a mortgage, take the amount you save per month, divide your total closing costs by that amount. Divide the number that you come up with by 12. The final number is the number of years that you need to stay in your house before you actually save any money at all by getting the new mortgage.

Now... Sometimes, it just makes sense to buy more than you can normally afford. If housing costs are going up... way up... then equity will surely follow and you can always refinance later at a cheaper rate or even sell out and move somewhere cheaper.

Just think first.


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