MOLLY CATALDO: What do low interest rates mean for you?
With interest rates at historically low levels, now may be the time for you to consider what this means for you. Low interest rates usually generate thoughts of buying a house or doing home remodeling projects. However, there may be other opportunities for individuals and business owners.
Low interest rates means money can be borrowed at a minimal cost. So, if you’re thinking about buying a home or starting a home remodeling project, now is the time to consider the following:
• Buying a house – Banks are offering mortgages with low interest rates with a locked-in term for 30 years. This means, that your payment will never increase throughout the term of your mortgage. If you combine that with the depressed real estate values and the increase number of homes for sale, now is good time to consider a home purchase.
• Home remodeling – Many homeowners love their home and neighborhood and, instead of moving to a new home, opt to remodel the inside or put new siding or a coat of paint on it keep it up to date and in good repair. Home equity loans offer an affordable way to make the updates you would like, without breaking your budget.
• Refinancing Your Mortgage – If you own a home, and haven’t done so, now may be a good time to investigate if refinancing is a good option for you to save money.
Whether you’re seeking a mortgage to buy a home, seeking a home equity loan or simply looking to refinance at a lower rate, it’s important to have a good credit score. The better your credit score, typically the lower your interest rate. It’s also important to talk with your mortgage lender about the fees associated with a new loan, particularly if you’re refinancing. In some instances, the cost associated with refinancing may outweigh the benefit of the savings.
Other options to consider for taking advantage of the low interest rates include using home equity to payoff other loans that have higher interest rates. Consider the following:
• Consolidating your debt – Review all of your outstanding debt including credit cards, college loans, vehicle loans or other significant expenditures. It may be cost effective to consolidate these into a lower interest home equity loan. The advantages include having to make only one payment per month instead of having to make payments to several different parties, having a lower interest rate means lower cost to you and there may be tax advantages as well.
In addition to benefits for individuals, low interest rates also can be beneficial for business owners. This includes:
• Improving your business’ financial position – If you haven’t done so lately, carefully evaluate whether to refinance existing business debt or take out a new loan. To do so, take an accounting of your business’ existing debt including the outstanding balance, the loan rates, payment terms, personal guarantees and collateral. If looking to refinance or borrow new, be sure to get a clear understanding of the total costs involved to determine if truly is beneficial to your situation.
• SBA lending – Small Business Association (SBA) loans are another great option for business seeking additional funds to make improvements to their business. SBA loans offer affordable terms and a payment schedule that works for many businesses. Plus, new SBA rule changes have allowed for more businesses to take advantage of it.
Whether it’s for you personally or for you business, a recommendation is to meet with a trusted banker to determine a plan that fits well for your financial situation.
Molly Cataldo is branch manager and assistant vice president of Citizens Bank of Evart