Editor's note: The following column originally appeared in The Chronicle, the e-newsletter of of Associates Home Mortgage. It runs here with permission.

Periodic refinancing can protect your home equity

By Jonathan Klein, CMPS, Associates Home Mortgage

Last month I received the following question from a client: "With so many foreclosures occurring should I be overly concerned about the value of my home and should I refinance my mortgage and take some equity out?"

The issue of increased foreclosures is all over the news, especially here in the state of Florida.

We certainly have our share of foreclosures primarily due to the number of subprime loans funded in our market beginning in 2004 and then the slowing sales market resulting in borrowers unable to refinance out of their subprime loan because the loan to value was too high.

This situation is evidence that home equity is not safe nor is it liquid. For this reason I advise my clients to periodically refinance their mortgage and take equity out and invest it in a liquid, safe, rate of return environment.

This is done when it is prudent, meaning that you can afford the higher mortgage payment and you have a plan for your equity. Consider this: The people whose homes are being foreclosed on don't you think they would rather have their home equity in the bank than in their home, even if the home is worth less than the mortgage they owe? I think they would!

Regarding home values, in the short term I believe our market will remain relatively flat over the next two years, unless of course we have a dramatic change to our property tax policy.

In this event we will see a massive increase in first-time homebuyers entering the market, likely at the condo level first and then moving to townhomes and finally single family homes. Remember, home values are always biased to go up!

Jonathan Klein is a certified mortgage planning specialist and general manager of Associates Home Mortgage in Boca Raton. He can be reached at 561 477-1136 or by email at jonathanklein@associateshomemortgage.com. The Associates web site: www.itsjustfixed.com.