To combat the recent surge of inflation, the Federal Reserve introduced its first rate hike in 3 years on March 17, 2022 and is expected to raise interest rates as many as six times in 2022. While this may help take the pressure off of rising prices and stabilize the economy long-term, it would also mean that expenses that require a loan will cost more next year than they do now.
Here are five things you should consider taking advantage of right now before interest rates continue to rise.
1. Refinancing Your Mortgage
If you haven't already, now might be the time to take a second look at your home loan. Ever since the pandemic began, mortgage rates have been incredibly low, and that's created an opportunity for many homeowners to potentially shave a hundred dollars or so off their monthly payment.
For instance, let's say you've got a 30-year fixed mortgage for $200,000 with a 4.5 percent APY. Under that scenario, your monthly principal and interest would be $1,013. However, if you were to switch to a 3.5 percent APY, your payment would drop to $898, saving you $115 every month.
2. Refinancing Your Student Loans
Just like your mortgage, if you haven't refinanced your student loans in a while, then there's probably a good chance that you might be overpaying and could potentially save with a lower rate. Since 2019, rates have come down considerably, creating an opportunity for relief. However, that can change if there are rate hikes.
The best place to start is by calling your current lender. Ask them what their current rates are and if there are any opportunities to refinance your student loans. As long as your payment history and credit score are good, opportunities should be available.
3. Buying a Vehicle
Given the recent dealership supply shortages, buying a vehicle right now can be somewhat expensive. But if you typically finance your purchase, then an increase in the interest rates will have you paying even more in the near future.
Buyers who are serious about getting a vehicle should start by getting pre-approved. Once you fill out your application, the pre-approval will last around 30 to 60 days depending on the lender. This will help to lock in the interest rate while you take your time finding a good deal.
4. Consolidating Your Debt
If you've got several debts of varying interest rates, then consider turning them into one manageable payment using debt consolidation. This is where you essentially take out one larger loan to pay off several smaller ones.
Just like mortgages and student loans, the rates used for debt consolidation fluctuate with the market. So, if you're considering one, reach out to potential lenders soon before rates start to rise.
5. Buying a Second Property
Have you always wanted to have a vacation home? Or what about an investment property that you could use to generate some rental income? No matter what your motivation is, now might be the time to consider taking action.
As a general rule of thumb, the interest rates on real estate that are not considered your primary residence tend to be 0.50 to 0.75 percent higher.
For this reason, if you have any hopes of owning a second property, don't hesitate. Take advantage of these low rates before the next rate increase.
Contact: carolina.darbellesv@iquanti.com
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Original Source: Laurel Road: 5 Things to Consider While Interest Rates Remain Low
