Expert: Jessica Bryan - 5/25/2006

Question
So you are leaning towards the fact that instead of refinancing in 3 years we might be better off cashing out on the equity of the house by selling it and moving into another house?

Isnt that just another way to "refinance" the loan? Or are rates considerably different between refinancing and buying out right?


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Followup To
Answer -
Hi Jason;
Of course things can change drastically, but all indications are that the interest rates are rising and will continue to rise.  I cannot say that you will be able to find a better loan in three years. As a matter of fact, it is my belief that we will not see these rates again for quite some time. The only thing that I can tell you is that if you have an upwardly mobile job you will be able to afford a higher interest rate in three years. Also (and more importantly) I am seeing many younger people buying and selling homes at a faster rate.  Someone who has the kind of job that requires moving around quite a bit does not expect to stay in a home for more than 3-5 years. This means that you will probably have to buy elsewhere and get a different loan at that time anyway.

Here is something else to consider: Many people take advantage of the real estate market and the equity that they build to move while the children are young and not yet in school.  This is when a move is easier and can also be quite lucrative. Therefore, thinking that you can refinance three years down the road may not necessarily be the right decision for you.

Regards,
Jessica Bryan

Answer
Hi Jason;
Yes; I am saying you might want to be thinking about moving to another home which is like refinancing but you will build on the equity at the same time and continue to move up. Buying a new home gives you greater equity in faster time.  (This acts as a balance for the extra costs you  might incur and for higher interest rates.) The benefits are that you will grow your assets while making the same payments you might be making in the old home if you were to refinance.

One more thing: I think that it would be wise to consult with a financial planner to discuss some other creative ways to help maximize your assets.

Regards,
Jessica Bryan