The words buyer beware is supposed to keep consumers warned whenever they hit the malls or buy online. Home buyers should mind a similar alert-borrower beware-especially when it comes to mortgage refinance.

The famed Spider-Man was heavily influenced by the phrase, 'With great power comes great responsibility.' It reminded him to be cautious in the use of his tremendous super skills.

Homeowners must also take those wise words to heart. Many have access to a substantial source of funds-the equity in their houses. When it is in the form of a mortgage loans, it can be handy to pay school charge, fund a business start, or consolidate debts.

As Spider-Man would tell any house owner, though, there is great responsibility with this financial clout. Use the money frivolously or choose the wrong mortgage loan, and you could pay a heavy price. It is better if you use mortgage calculator, if you are not sure what option to choose. It's fast and convenient, and will take you little time to see the pros and cons of the options you have.

Choose the adequate reason

Using mortgage refinance to spring for something whimsy like a holiday will be entertaining and should give you a tax deduction, but it's not a good perspective move. After the suntan fades, the only thing you've done is add principal and long-term interest fees to your house payment.

Instead, use mortgage refinance for things such as house improvements or to start a business. These are long-term investments that hopefully will continue to grow in value during the time you own the house. In case you sell your home, you must be able to recover the value of the amount you originally borrowed, plus appreciation.

Try not to use home equity to pay for school fee. Instead, start investing money from the time your child is born and then an investment's value add to your savings.

Choose the right mortgage loan

If you choose to do a mortgage refinace, you'll need to carefully choose your mortgage loan. Many people choose to consolidate debts into a first mortgage, such as an adjustable-rate mortgage (ARM) or a loan with a balloon payment. Be careful with these mortgage loans. The rate on the ARM will likely increase after the first period. With a balloon loan, you'll be required to pay the mortgage loan fully at the end of the five- or seven-year introductory period.

The better way is a second mortgage, such as a home equity line of credit (HELOC) or a home equity loan. These loans have their weak points. A HELOC has varying rates, so if rates start to grow, you could find yourself in trouble. A house equity loan has a fixed rate, stable loan amount, and is maybe your safest bet. However, you'll need to make sure that you can afford the payments, and be watchful for any exorbitant fees.

Your home has super-strength when it comes to personal finances. Its equity may give you fast cash when you want it most. But with this strength comes big responsibility. In case you're going to tap equity, borrow wisely. Otherwise, you'll find yourself in a web of financial troubles from which even Spider-Man wouldn't be able to escape.

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