Re-financing your mortgage, what could possibly be wrong with that idea? Interest rates may never be this low again. Before recommending that you go ahead with a re-financing, traditional financial advisors will ask you three simple questions. They are: what is the rate of interest on your current mortgage, how many years to you have left to pay on it and do you have enough cash to pay for the cost of refinancing. 

Make no mistake, a well-timed mortgage refinancing under the right circumstance might  save you a lot of money. Your bank or finance company easily can figure out just exactly how much. But there is a danger you need to be aware of. Folks often use a refinancing as the opportunity to get more cash out if their home. 

That is, when you refinance, your house will be re-appraised at its current value. Because the value of your house may have gone up and since you have been making payments on your mortgage balance, you might be given the chance to borrow more than you owe, and walk away at closing with some extra cash in your pocket. 

So what’s could possibly be wrong? Perhaps nothing, depending on what you do with that cash. But often times people make irresponsible spending decisions with that money and justify it based upon the tax deductibility of the interest. In other words, they buy something they really can’s afford and end of paying for it over the life of their mortgage.

So if you find yourself tempting by the extra cash. Proceed carefully. Consider taking only enough to pay off the existing mortgage. If you have credit bills to pay off, be careful too. It may be a good short-term decision to pay them off but in the long run that may free up your emotional line of credit and you could spend even more.

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