I am sure you have heard the popular buzz word that has been circulating recently – Refinance. While the majority of the news you have read relating to mortgage refinancing probably relates to home mortgages, the farm loan market is equally as active in many areas. A recent article posted by DTN and 1st Farm Credit Services (Interest Rate’s Gold Rush) takes a look at some fixed-rate loans at various Farm Credit offices around the Midwest. What they are seeing are rates that have not been at this low of a level since the 1950’s. For some farmers, refinancing is a way to lower their monthly payments by staying in a longer term mortgage, but dropping down to a lower interest rate. Other borrowers are choosing to shorten the term of their loan and pay off the the debt sooner, and in a lot of cases create new payments that are not significantly different than their previous payments on the longer-term note because of the significant drop in rates.
The biggest difference between refinancing an ag loan as opposed to a residential loan, is the refinancing costs. While it may cost a few thousand dollars to refinance a home mortgage, the article states that Farm Credit Services of Mid-America charges $350 to change the loan terms. By taking away one of the biggest barriers to the refinancing process, the door is open for many ag borrowers to negotiate more favorable terms.
As the seasons change and we move into fall, the time when farm sales begin to pick up steam, the availability of low interest rates will give buyers more options. If the farmland continues its recent tend of tight inventory, and buyers remain active, having low interest rates added into the mix could make for an interesting fall.
Tags: agriculture, credit, debt, investors, loans
