Debt Payoff Plan | Debt Pay Off Plan

Refinancing your home loan may seem like a great way to raise some quick cash, but the fact is, it’s a terrible way to raise money.

Here’s why.

Let’s say you want to buy a new car. That is typically a five year loan, sometimes even a three year loan.

If you refinance, you have just extended the life of your home loan – resetting the clock and making the loan last 30 years.

The minute you buy your car, its value decreases. So you have taken money out of your most valuable asset, your house, making it less valuable. You have put that money into a depreciating asset. Your car will get less and less valuable over the years. After five or six years you are very likely going to be looking at a new car. When you trade your car in, that $30,000 car is now going to be worth only a few thousand dollars in trade-in value.

Let’s say that it’s new furniture or a new television set that you want. Again, these items will depreciate in value over time. By the time your television dies in ten or 12 years it will be an outmoded relic with practically zero trade in value.

So what’s a better choice?

There are never easy solutions – but honestly, the better choice is to only buy what you can afford, and not cannibalize your home’s value.

Buy a used car and a used television set and furniture from consignment stores. And if you can’t afford them…save up until you can.

Otherwise you will very likely end up stripping away all of your home’s equity with nothing but some used goods to show for it in the end.

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