2020 Trends: Loan Refinancing

Amid pandemic lockdowns and economic uncertainty, a bright moment has been spotted in 2020 — record-low interest rates. With the Federal Reserve’s plans to keep rates near zero through 2023, this year has presented an opportunity for consumers to rethink their finances. Low rates have led to a surge of auto and mortgage loan refinances.

1st United Credit Union has witnessed the growth first-hand.

“We have experienced a significant increase in mortgage and auto loan refinances since this time last year,” stated Steve Stone, President and CEO of Pleasanton-based 1st United Credit Union. “In fact, our auto loan refinance business has tripled.”

Mr. Stone commented further. “Today’s low- rate environment warrants a conversation about refinancing for just about everyone. On top of that, improvements in your credit score could add up to significant savings.”

Some of the many benefits of a loan refinance include:

• Lower payment.

Refinancing could significantly reduce your monthly auto loan or mortgage payment through a reduced rate or an extended term.

• Reduced term.

Depending on your loan balance, your monthly payment may go up, but you’ll pay off your loan sooner and may save on interest over the life of the loan.

• Different mortgage type. For homeowners, you might benefit by moving from an adjustablerate mortgage ( ARM) to a fixed- rate option. Others have looked at switching from one ARM to another with better rates.

• Cash out. For homeowners, if you want to take money out of your house for a remodel or education expenses, for example, this is an option. Keep in mind that your rate could be higher. You should also consider a home equity loan or line of credit. With a cash- out refinance, your new loan balance will be higher than what you currently owe.

Refinancing isn’t right for everyone, however. Depending on your financial goals, you might want to hold your course. Here are some things to consider:

• You’re deep into your current loan. If you’ve held your loan for the majority of the term, you’ve already paid most of the interest.

• The breakeven point doesn’t make sense. For a refinance to make sense, your long- term savings should surpass short- term expenses. Compare the expense of closing costs to the cost savings over the life of the loan.

Before refinancing, take time to work through the numbers. 1st United offers refinance calculators on their website at 1stunitedcu. org that are a good place to start. Their experienced lending professionals are also ready to help. To get started, call ( 800) 649- 0193 or stop by any 1st United Credit Union branch