If you are refinancing your mortgage for the purpose of cashing out equity, then you should be aware of certin risks. If you have purchased a house with a non-traditional mortgage such as an 'interest only' loan or a 'negative amortization' adjustable rate mortgage, then you're going to be exposed to very similar risks.

The risks are something banks and real estate agnets are reluctant to discuss. And no, we're not talking about rising interest rates here. We're talking about a real deflation in real estate prices.

Consider these historical facts. Home prices don't always go up. Median home prices in the Boston area dropped 6% in the early 1990s. At the same time housing prices dropped 13% in Worcester, Massassachusetts. In New Haven, Connecticuit the value of homes dropped 21% from the late 1980s up until the mid-1990s. Some prices inthe Washington, DC metro area fell 40% in a housing crash in the late 1980s and early 1990s. Some homes were still selling for less in 1996 than they were in 1990.

If you plan to buy a house and 'flip it' (sell it) for a quick profit in 6-36 months, think again. If home prices begin to decline, the house you buy could sell for less than you paid for it. As of 2005 several economists were describing the United States housing market as a huge bubble, much bigger than the famed dot com bubble that drove thousands of technology companies out of business.

Decide for yourself the risks, but you might want to read Robert Shiller on the idea of a 'housing bubble.' And if you have the time, read this article about a 'housing bubble.'

If you have decided to refinance your mortgage, remember to compare different web sites to find the best terms and conditions for you. And don't forget to shop locally. Your home town bank may have better rates than you can find on the Internet.