Put money back in your pocket | Business

The current low interest rate environment is a great opportunity to refinance your existing loans. You may be familiar with mortgage refinancing, but the same benefits also apply to auto loans, recreational vehicle loans, boat loans, motorcycle loans, etc.

If you have a loan, you may be able to lower your interest rate, pay off your loan sooner, or lower your monthly payment by refinancing.

Why refinance?

Refinancing existing loans can increase your discretionary income – literally putting money back in your pocket every month with lower payments. There are many uses for the extra money, of course, but you may want to consider setting aside some of the extra money in a savings account.

According to a 2021 CNBC poll, only 39% of Americans could afford an emergency expense of $ 1,000.

Life is coming, so it is important to create a rainy day fund for you and your family. Once this is established, you can start investing for longer-term goals, like saving for a child’s or grandchild’s education.

Other common reasons to refinance include home improvements, paying for education, consolidating bills, or taking vacations.

Mortgages are what we often think of when we think of withdrawing money, but if you have equity in your vehicle, you will also be able to withdraw money for a vacation while keeping your payments the same thanks to the current low rate. environment.

Is refinancing right for you?

This question depends on various factors and each of the different scenarios should be considered. For example, refinancing an auto loan can be very simple and quick. It is not a long process and there is usually no cost to do it. Even documents can usually be signed electronically from home at your convenience.

The bottom line is, if it’s free and you’re saving money, refinancing your loan is a no-brainer.

For a mortgage, however, closing costs need to be factored in. These often run into the thousands of dollars once all of the required title, appraisal, and third-party fees are included.

While these fees are compatible with most mortgage lenders and can usually be included in your loan, you should make sure you understand any fees charged by the lender, which can vary widely.

With today’s historically low rates, mortgage refinancing can still be very beneficial. We often find that mortgage holders can get over closing costs in a year or two of payment savings. If your goal is to stay in your home for the next five to ten years, it probably makes sense to consider refinancing. If you are planning on moving or selling your home in a year or two, it may not be a good idea to refinance.

The best way to determine what will work for your situation is to discuss your options with a trusted financial partner. Everyone’s scenario is a little different. In central Kentucky, we are faced with a lack of housing availability. As a result, we see a lot of cash refinances when homeowners decide to add square footage or a swimming pool and make their current home their dream home.

Home equity lines of credit, commonly known as HELOCs, are another option for doing many of the same things without refinancing your existing mortgage. Now is the perfect time to make major improvements when interest rates are very, very low.

If you want to discuss your options with a local lender, it’s important to be prepared by understanding what your current payments are and interest rates. This will help your trusted financial expert see if they can save you money fast and make it easy for you to compare your options.

You may want to start by educating yourself online, calling, or stopping by a local branch to discuss what is available to you. We look forward to cooler weather and more money in your pocket this fall.

Chuck Eads is Director of Loans at Abbound Credit Union.

Chuck Eads is Director of Loans at Abbound Credit Union.

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