As more lenders offer the option to borrow up to 100% of the value of a property, homeowners have to decide how much they should borrow. This is especially true if you've built up some equity in your home and now want to refinance your mortgage. So, should you get a loan for 100% (or more) of what your home is worth? Think about all of your choices before you decide.
The first thing you should think about is why you want to refinance at 100%. Do you have a good plan for the money, or would it just be nice to have it? If you want to buy something or pay off something, you could use your home equity, and a mortgage refinance at 100% of your home's value could be a good idea. For example, if you have a lot of credit card debt, you probably pay hundreds of dollars in fees and interest each month. If you only make the minimum payments each month, you won't even make a dent in the amount you owe, and you'll probably end up paying thousands more than you owe. Instead of making those monthly credit card payments, you could use the money from a mortgage refinance to pay off all of your debt. Most of the time, the interest rate on your mortgage refinance will be much lower than the interest rate on your credit card debts.
Don't forget to think about how much your closing costs will be when you refinance your mortgage. You should also keep in mind that your monthly house payment will be higher or that it will last longer. Be sure you can meet those requirements.
You might also find that you can use the equity to pay for college, a new car, or something you haven't been able to afford otherwise, like a vacation or a down payment on a second home. You've worked hard to build up the equity in your home, and some people think you should put it to work. With a mortgage refinance, you can do exactly that.
There's no question that the value of your home is an asset. There's also no doubt that a lot of people just accept the fact that they'll always have to pay their mortgage. But don't lose sight of the fact that if you work hard to pay down the loan, you may not always have to make mortgage payments. Instead of refinancing your mortgage, you might want to focus on making extra payments.
At the end of the day, you are the only one who can decide what you should do. If you do decide to refinance your mortgage, make sure you have all the information you need to do so wisely.
