posted on February 19th 2018 in Your Financial Advisor with 0 Comments /

In our decades of experience, we’ve found that this strategy may not be appropriate for everyone. For some, it has caused more harm than good. For others, it has been beneficial. We, however, wanted write on the topic, because it is a topic that we are often asked about. To properly consider your options, you really have to crunch the numbers and consider how debt affects your long-term goals. If this is a question you’re wondering about, we encourage you to reach out and talk with an advisor

Real estate is fundamentally tied to the American Dream and it satisfies one of our most basic needs. Your purchase has several financial benefits that can help you build wealth and save over time. In addition to building equity and providing tax benefits, owning real estate can also open up opportunities for additional investments. While many approach refinancing their mortgage to leverage their equity for improvements on their current home, there’s an opportunity here to expand that equity into further investing.

The first step is to deciding whether refinancing is the best path for your individual circumstances. Your financial advisor will be able to guide you through this decision from start to finish, making sure you capitalize on the benefits available but also sidestepping the pitfalls that can catch you unaware.

To start, your financial planner can connect you with trusted real estate professionals who can help you gauge your property’s value as well as seasoned mortgage brokers who can offer competitive rates. From there, your advisor can evaluate the numbers to help you decide whether the out-of-pocket costs of refinancing are worth the reward. Keep in mind that pulling out the equity you’ve built means you’re once again playing the market on your current home. You’ll want to make sure your plans include holding onto your current property. If you plan on selling in the short-term future, refinancing may put you in a precarious position if the market dips. Make sure to also fully understand any tax implications you may have as a result of a refinance.

By exploring your options, the goal is to determine whether the benefits outweigh the costs. There are multiple avenues for reinvesting your equity:

  • Make another real estate purchase. While the San Diego market is hot, the loan rates continue to be competitive. Considering San Diego’s coastal lifestyle is a big attraction for many around the world, reinvesting in an investment property may be worth considering. A second home elsewhere can also have its benefits. Perhaps it’s your future retirement home or home for your children. This could be the time to look ahead at your plans for the future.
  • Pay into your retirement. Another option would be to pay into your retirement accounts. Your financial planner can help you decide how to leverage this for your tax benefit and savings.
  • Expand your portfolio investments. This can also be a great opportunity to pursue other new avenues of investing or simply bulking up your portfolio for a larger return.

When you have the opportunity to capitalize on the wealth you’ve earned, it makes most sense for you to investigate your options for their fullest potential. There may be new goals or ideas that you’ve been kicking around but haven’t pulled the trigger on. Before pulling the trigger on refinancing your property, strategize what your intended use for those funds will be. Make sure that the numbers make sense. It costs to refinance, so determining whether the gain outweighs the loss should be fundamental to your decision. Know that you don’t have to go at this alone either. WorthPointe’s team of CERTIFIED FINANCIAL PLANNER™ professionals can help you put the pieces together.

Continue Reading

Other articles filed under Your Financial Advisor

Independent Advisors: Do You Have Freedom Or Are You Drowning?

October 30, 2020 - Many financial advisors have their reasons for going solo. They want to maintain control of client relationships, be their own boss, and increase their earning potential. But somewhere along the way, the excitement wears off. Things get complicated. The tedious...
Continue Reading

Are You Financially Prepared For A Divorce?

June 2, 2020 - As life expectancy rises, so do the percentage of divorces later in life. Termed gray or silver divorces, these breakups are often exacerbated by the various transitions that come later in life: empty nests, aging parents, career changes and retirement. ...
Continue Reading

How Firm Culture Can Drive Success

November 13, 2019 - We’ve spent a lot of time cultivating a deliberate culture at WorthPointe — going through several iterations to get to where we are today. All the effort we put into the process was well worth it, as we truly believe...
Continue Reading

How to Build a Relationship With an Attorney Before You Need One

October 29, 2019 - How do you know if you need a lawyer? If you needed a lawyer tomorrow, would you know who to call? What do lawyers mean for your financial future? In this episode of “The John Chapman Show,” Brooks DePyster, a...
Continue Reading

Not All $1 Million is Created Equally

October 8, 2019 - Many people put their noses to the grindstone for years and years, working hard, saving, and investing with the goal of ultimately having $1 million. While that might seem like a perfectly admirable goal, to me it seems a bit...
Continue Reading

Return to Blog Home