Should you consider an Adjustable Rate or Split-Loan Farm Loan Option?

by Dennis Meier, Senior Credit Analyst at Farm Plus Financial
The typical farm real estate loan is financed at a fixed interest rate amortized over 25 years to mature in 15 years. The advantage of this type of farm loan product is a known rate and payment for the term of the loan. The disadvantage is not reaping the benefits of lower interest rates offered on adjustable loan products. For instance, at Farm Plus Financial, the interest rate on a 5 or 7 year adjustable rate farm loan is approximately 1.50% lower than a 15 year fixed rate farm loan. The lower interest rate results in a reduced payment thereby increasing your farm cash flow.

Adjustable Rate Farm Loan Option

Rising rates at the end of an adjustable period are always a concern on any adjustable rate loan. But, did you know that the interest rate would need to increase nearly 3.00% for the remainder of the 15 year period to equal the interest paid on a 15 year fixed loan product? If the adjustable rate does not increase by 3.00%, then you will have saved money on your loan. Also, at Farm Plus Financial, you can convert to a fixed rate product during the adjustable term should you feel the interest rates will be increasing significantly. The staff at Farm Plus Financial can explain the advantages of adjustable rate farm loans to you.

Split-Loan Option

If you do not feel comfortable borrowing the full amount on an adjustable basis, Farm Plus Financial can offer many different loan options. One of the loan options to consider would be a split-loan option. A split-loan option allows you can take advantage of the lower adjustable rate on a portion of your loan request and the comfort of a fixed rate on the other portion. Your farm loan relationship manager will work with you to help you decide the amount to be split between the adjustable rate and the fixed rate farm loans based on your individual situation.

Conversion Option

If you should ever desire to convert the rate on the adjustable portion of the loan, Farm Plus Financial offers a conversion option on all farm and ag loans that will allow you to convert the unpaid adjustable rate balance to a fixed rate product. Farm Plus Financial is one of the only lenders that offers these flexible farm loan options, which is why Farm Plus Financial rates so high in customer satisfaction.
If you have been thinking about applying for a new farm loan or to refinance existing farm and ag loans for a lower rate, there is no better time to call Farm Plus Financial to check out the plethora of farm financing tools we have available. Contact Farm Plus Financial by phone at 866-929-5585 or start your online farm loan application today.