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Is now the right time to refinance your big loans?

Interest rates are down and could go lower
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Posted at 6:00 PM, Mar 10, 2020
and last updated 2020-03-10 18:18:57-04

BUFFALO, N.Y. (WKBW) — After several years of interest rates starting to go up, they are now falling which means good news for consumers - thanks in part to world events such as the coronavirus which is spurring financial action to prevent a recession.

"There is market expectations that they are heading back to zero again," said Steven Gattuso, Assistant Professor of Finance for Canisius College.

"Contacting a bank or credit union and going over some numbers certainly can't hurt," added Noelle Carter, President & CEO of Consumer Credit Counseling Service of Buffalo.

A key to successfully refinancing any loan will be your credit score.

Those with good scores can now get mortage rates just barely over 3% and auto loans between 4% and 5%.

Since most people make monthly payments on cars, education loans, and mortgages; here is some thoughts to consider:

CAR LOANS - Now is the time to refinance a newer vehicle if you did not get a good deal at the time you bought your car/truck/suv. You might not save much on the monthly payments, but you could save hundreds of dollars in interest over the life of the loan.

STUDENT LOANS - Finding a better interest rate on an education loan could save you both in your monthly payment and overall interest cost - but that only applies to loans from private sources. Federally subsidized student loans cannot be refinanced with another federal loan! If you use a private loan to pay-off a federal student loan, you will lose important protections that only come with a federal loan.

"Such as forbearance's for deferments, where if you come into financial hardship, you don't have to make payments for a certain amount of time. People could be enrolled into income-based plans to get their payment lower each month. They may also be lining themselves up for public service loan forgiveness. So, you want to be careful about refinancing your federal loans into a private loan," said Noelle Carter.

MORTGAGES - People with a mortgage stand to save the most money with the lower interest rates - possibly tens-of-thousands-of-dollars over the life of the mortgage. While closing costs can be expensive, for those not looking to sell again in the near future, refinancing is something to consider.

"Usually it is a 1/2 percent difference in your rate that will justify considering refinance," explained Steven Gattuso.

Besides looking to reduce your monthly loan payment and overall interest charges, consider using the lower interest rates to reduce the term of your loan. "You can look at refinancing from a 30-year to a 15-year mortgage," explained Noelle Carter.

HIGH-INTEREST CREDIT CARDS - There is one more thing to consider if refinancing a mortgage. "Cashing out" a mortgage will give you extra money to pay off high-debt, high-interest credit cards which may be charging you interest rates approaching 20%.

"A "cash-out" is when you are refinancing more than what the current mortgage balance is right now," comment Steven Gattuso.