Loan Modification

Don?t Spend the Equity in Your House

By Eugene S. Melchionne, Connecticut Consumer Attorne

Do you have any equity left in your house?  If you are one of the lucky ones who do, the temptation to pull out what little value left in your home may be great.  You may have lost income or some bills have grown to large to manage.  But resist the urge to refinance now even if the rates are at “an all time low”.

Several factors can hurt your personal finances at a time when you think you are doing your best to help them.  Do the math.  You might have less than 15 years left on your current loan.  Consider how old you might be when a 30 years mortgage finally gets paid off.  Consider how much that cash now might cost.  That $50,000.00 cash out might cost you more than $150,000.00 in payment over  the life of the loan.

Most importantly, you might lose the protection of state exemption laws.  For example in Connecticut, the homestead exemption is $75,000.00 per owner.  If you have $150,000.00 equity in your home, but refinance to take $50,000.00 out to pay bills, you have lost $50,000.00 of value that would otherwise be protected by state law.

Don’t trade the ease of buying now for the pain of paying later or the real risk of foreclosure.

Full post as published by Mortgage Law Network on May 26, 2009 (boomark / email).