Lower Rates, Not Just a Lower Payment

Ron Culver

Ron Culver, VP, Real Estate Market Manager Bozeman area.

It’s a cycle as predictable as time itself; mortgage rates take a dip and the advertisements touting lower monthly payments for your home loan fill your mailbox/inbox. We find ourselves in the thick of that phenomenon right now as the interest rates for residential mortgage loans are at lows not seen since 2017. And sure, refinancing into a lower rate can lessen your monthly payment compared to what you have today, however opportunity knocks on all kinds of doors when rates take a plunge.

For example, have you considered reducing the term of your loan?

How about getting away from that Adjustable Rate Mortgage (ARM) that may have some impending volatility? Or even using some of the equity in your home to do something to improve your home like a bathroom remodel (who does not stay awake at night dreaming of how much fun that is). The truth is that lower interest rates offer so much more to a homeowner (or potential homeowner) than just a lower payment.

Interest Rates

Let’s take a quick look at the possibilities:

Reducing the term

Most people default to the good ol’ standby of a fixed rate mortgage with a long repayment term. Did you know there are other options available? Fixed rate mortgages are often offered on terms ranging from 10 to 30 years. Loans with shorter terms are within the realm of possibility and all can become more of a reality as rates fall.   Your monthly payment may go up as the principal balance is repaid over a shorter time period, however the amount of interest you pay over the life of a shorter term loan can be drastically less than that of the more traditional long terms options. We can do the math for you, it is compelling. I promise.

Turn your ARM into a fixed rate loan

I’m sure if you have an ARM product, you chose it because of the lower initial interest rate during a predetermined introductory period. Will that rate begin its annual adjustment dance soon? If so, check out fixed rate mortgage loans, they may be cheaper than you think. And best of all, the rate will not change!

Accessing the equity in your home

The possibilities of accessing current equity are almost endless. Chances are, if you’ve been in your home for any length of time, you have some equity built up.

  • How about using it for a trip to Starbucks, in Barcelona?  Americans don’t take vacations like folks in other countries, and as a result, we have the highest stress level of professionals in the world (or so the scientists say).  Taking the family on a vacation is a great way to hit the reset button and enjoy this amazing world we live in.
  • Looking for a nicer/bigger/better home to live in but can’t find anything on the market that suits you?  How about turning your existing home in to your dream home?   Using that equity to remodel is a great way to keep the kids in the same school district and still upgrade to the fully automated home with the “she-shed” out back you’ve been dreaming of.
  • Maybe you have had enough with cold winters and you want a winter get away someplace warm.   Equity in your primary home can be used to purchase a 2nd home where you can play golf 12 months a year.
  • If a vacation home in SoCal isn’t your thing, maybe a piece of land on a river on the other side of the state will be step one of your ideal retirement.

Toxic loan programs

Many fell victim to some less-then-ideal loan programs that were prolific during the years leading up to the great recession. There are still more than $430 billion worth of those nasty loans out there. If you have one of them, it is a great time to take a look at how to kick it to the curb and replace older loans with something more traditional and appealing.

Debt consolidation

Credit card interest rates are horrible. Loans on “toys” can be very high interest. Student loans can be burdensome. Maybe a recent divorce has caused some discomfort that can be paid off. Refinances that put dollars and cents in your bank account can help consolidate debt in to one payment with an interest rate that will most likely be far less than those other consumer type loans.

Lower rates mean more affordability

It’s amazing how much a .25% reduction in a note rate can impact how much home you can qualify for. If you’ve visited with your local lender in the past and found out the monthly payment on that dream home was just a little out of reach, pick up the phone and call again. It’s possible that with a lower rate, the payment on that same dream home may be within reach now.

Payment reduction

Maybe you don’t need to access equity to buy/pay things down. Maybe it’s as simple and wanting to drop your monthly mortgage payment by a decent amount.

The benefits of a lower interest rate environment are nearly endless

Talk with a Stockman banker. Talk with your accountant. Let’s see how this unprecedented rate environment can benefit you and get you on whatever financial path you’d like to be on. Who knows, the next chapter of your financial future may be closer than you think….or maybe it’s waiting outside right now and you just have to open the door and walk outside to make it happen.

Open the door

Bank Disclosures

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