3 Home Refinance Options to Consider in a Bad Economy

With mortgage interest rates at historic lows, it may be the time to begin home refinance options if you own a house. While the economy is still struggling, interest rates continue to remain low, giving the opportunity for homeowners to find some financial relief. There are three common home refinance options that are used in today's real estate market.

Here are 3 potential options for refinancing your home and taking advantage of today's low mortgage rates.

One of the most common home refinance options is to lower your monthly mortgage payment. Even a percentage point less on a new mortgage rate (compared to the current rate) can lower a monthly payment by over a hundred dollars. If the new mortgage rate is more than a point lower, then a homeowner can expect a much lower monthly payment.

If your goal is to lower your monthly payment, then make sure to calculate your break even on the refinance. Most banks will charge closing costs on a refinance, which could run a couple thousand dollars depending on the amount that is being borrowed. Closing costs could include origination fees, appraisal fees, title fees, and more.

Another popular home refinance option is to shorten the years on your mortgage through a new loan. For example, a homeowner that has a 30 year mortgage could refinance to a 20 or 15 year mortgage. Most of the time, the lower the terms of the loan the lower the interest rate.

Knocking of years on your mortgage can be a great way to lower the overall costs of owning a home. Depending on the principal of the loan, a homeowner can save tens of thousands of dollars by cutting off even 5 years from a loan. Refinancing is a popular way to cut years off a mortgage quickly.

While not as popular of home refinance options as it once was, taking cash out on a loan is another possibility. Need some extra cash for a remodeling project or maybe some extra cash to put in that pool you always wanted? Taking cash out from refinancing is a way to increase the value of your home while rolling the costs back into your mortgage.

It is important for homeowners to do their due diligence before taking cash out on a mortgage. Look for other options like home equity loans or other funding sources before rolling these costs back into a mortgage. In some cases it may be smarter to take cash out on a refinance while other times it may not.

There are several home refinance options that homeowners can take when looking for a new mortgage. Whether you are looking to lower your monthly mortgage payments or shortening the number of years on your loan, there are plenty of options. There is even the potential to take cash out on a refinance if you need the extra money to make improvements to your home.