Hey, I already knew that!

You don’t want to be told what to do and not do, I know. We are big people now and it can be just galling to have someone tell us what to do, especially when it comes to our money. We’re not kids anymore after all . . . are we?

Of course not! We really don’t need some newsletter schlep trying to come off like an expert on us. For example, we don’t need to hear about one of the biggest mistakes people make in their personal finances. We know that this no-no can be devastating to the attainment of personal financial freedom. Yup, we know that borrowing against our home equity is a financially dangerous thing to do. Clearly, if someone borrows against the equity in their home to pay off credit cards or other consumer debt, they are likely in for trouble. We know that the reality is that very, very few people who take equity out of their home for this ever get ahead. After all, if someone is of such a mindset to run up credit card debt, just paying it off with stolen equity does not change them so they no longer have the bad habits that got them there in the first place, right? You know just like I do that Americans borrowed $701.5 billion last year directly out of the equity in their homes. We won’t fall for the advertising and hype paid for by the lenders themselves. No way! We are too smart, too unemotional to be sucked into following the crowd.

What else do we know that would keep us from taking money out of the greatest single asset that most will ever have?

1. Each time we refinance, our mortgage is reset to 30 years; unless a 15-year mortgage is chosen, which is uncommon for equity snatchers. No wonder fewer and fewer people are enjoying the security and satisfaction of completely owning the home they live in.
2. Mortgages are front loaded so that in the beginning years, a far greater percentage of the payment goes toward interest and not principle. This means that every time we refinance, we suffer through those early, high-proportionate interest years all over again.
3. Each time we refinance, we are giving a huge bonus of interest paid to the lender, and reducing the dollars applied to principal.
4. Each time we refinance, we pay high closing costs; which in reality, is money forever lost, unless we are getting a far lower interest rate without taking out equity.
5. After refinancing, 2/3 of borrowers just continue to rack up consumer debt and have it all back within 2 years.

Yup, we don’t need anybody to tell us these things. After all, it’s only good common sense. But, just between you and me, I have to ask you an embarrassing question. If we know–in the vast majority of cases–that refinancing our homes to get cash usually puts us farther in the hole, why are we doing it more every year?

Hmm . . .

Dr. Stephen Cooper is the Director of OnlineOption.com, a training and support Web Site for both beginning and advanced traders. Over the past four years, Dr. Stephen Cooper has been the primary Stock Market Trainer for Mark Victor Hansen and Robert Allen’s Enlightened Millionaire Institute. He has taught thousands of students his proven trading strategies. He is the author of The Online Option Trader, Windows to Wealth, and The Truth About Money. He has also authored 10 interactive chart analysis tutorial CDs and contributed to several newsletters and publications.