Lousy Housing Market? Don't Sell…Refinance!

The prospect of slashing prices to encourage a sale-which is still no guarantee the house won't languish without an offer-is discouraging and frustrating. Lately, many homeowners have felt compelled to do just that, even against their best instincts, in an effort to unload debt or rearrange their finances. But there's usually a better alternative- a mortgage refinance. Here are three examples of how to make a refinance mortgage work for you:

1. Tap your equity. Many consumers are saddled with high-interest rate debt that's getting more expensive by the minute. Ideally, they'd like to sell real estate to pay it off and chase away the wolf that's howling at their doors. But if you have accumulated equity, you can extract it via a mortgage refinance and still hold on to your home, which is probably your most valuable asset. The wolf will walk away with his tail between his legs.

2. Use a refinance to remodel. Don't feel forced into moving now just because you've outgrown your house. Instead, consider refinancing your mortgage and using the proceeds-perhaps from a "cash-out" refinance or other mortgage designed to facilitate home improvements-to remodel or upgrade. While you buy yourself time for the market to turn around, you'll simultaneously add value to your property, which makes it a win-win investment strategy.

3. Refinance to a better rate. Conventional fixed rate 30-year loans are still at historically low interest rates, while adjustable rate mortgages (ARMs) are shattering records by climbing into the stratosphere. Don't sell yourself short-refinance now to capture excellent long-term refinance rates while getting rid of those burdensome loans that are going through the roof.

Many financial experts are touting the use of refinance options as the best solution for these troubled times. According to a National Association of Home Builders forecast, home prices will likely stabilize in 2008 and then continue their recovery. If you don't have to sell now, hold on to your home and wait out the storm. You can refinance without undercutting your investment goals and relieve the pressure to sell, while waiting for the market to change direction.