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Are your clients being urged not to refinance?

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Mortgage Professional America | 16 Sep 2015, 06:30 AM Agree 0
Liquidating home equity can spell big business for originators, but financial planners have been warning clients against the practice, arguing it’s a faulty financial move
  • Bob Schwab | | 16 Sep 2015, 11:57 AM Agree 0
    Leaving equity in a home can also be risky. Property values are determined by external forces that homeowners have no control over. They can and do rise and fall based upon a number of economic factors. The equity in a home is not safe, not liquid and provides no rate of return.
  • Ryan W. | | 18 Sep 2015, 04:04 PM Agree 0
    I wonder what a financial advisor would say if their client/borrower were to ask them should they cash out refi OR pull out some low earning investments to fund something? Something tells me that the financial advisor would change their position on this because they're making money on the assets their managing. At the end of the day financial advisors are not licensed mortgage professionsals and may not know the entire scenario as it relates to the mortgage transaction specifically. Every situation is uniquely different. What if the borrower is 100% guaranteed a settlement, inheritance or payout but the funds will not be accessible for 12 mos and but the funds are needed? I'm an MLO and would advise against all of these as well in general for being reason to extract equity from their home but there are valid circumstances where it is a smart move to do a "cash-out" refi. Home improvement obviously being one. Another being that in some situations using equity to payoff other high interest debt and "consolidate" can in certain situations be a smart move if the borrower is drowning in revolving debt and leaving off cat food in order to service that debt and not likely to have income increases and no true assets, tangible or paper, to liquidate or sell, and will close those revolving accounts out than saving a borrower $500 a month on a cash-out consolidation mortgage can be a lifesaver for some. The mortgage pro has to clearly advise the homeowner that this is the last opportunity to change their habits and make a new responsible path after the mortgage closes. Then this option can be a financial lifesaver for many. Not to mention the interest is now tax deductible under a mortgage debt vs. revolving debt. Situations like cash out refi's should not all be generalized on "do" or "don't" and should be analyzed by each individual case.
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