Signs That You Should Refinance Your Loan to Shorten the Mortgage Term

Student loans, home mortgages, auto loans, salary loans, business loans… It seems that all we do these days is to apply for a loan and think about how we’re going to pay it all off. Refinancing means paying off the existing loan and replacing it with a new one. There are many reasons people choose to refinance a loan. Sometimes, it’s to raise funds for an emergency. Other times, it’s to pay the loan off faster because the borrower now has a better income.

You can talk to a mortgage broker to get a better idea of where your loan stands. This gives you a picture of whether you should refinance the loan or not. Don’t just jump into the refinancing scheme because everyone’s doing it. You have to get a sense of where you stand financially to determine if you can afford to refinance or if you even need to do it at all.

You Suddenly Have Access to Extra Money

If you have a sudden windfall of cash, you can pay off the principal amount of your loan. That will cut down on the interest payments you need to make for the rest of the loan’s term. You’ll be able to finish off paying the mortgage faster. But you need to be careful when doing this because you have to commit to paying a larger sum every month. Are you sure that you’re up for it? Do you have an emergency fund you can tap into?

Whether it be an inheritance or a large tax refund, you shouldn’t jump the gun and apply for a refinance. Study your options well. Talk to experts. Only when you have a good grasp of your financial standing should you aim to pay off a loan faster.

You Have Recently Been Promoted at Work

money and paper billsAside from getting promoted, you should also be with a stable company that wouldn’t easily collapse. Financial stability is a rare commodity. That’s what you should be aiming for either in your job or business venture. Although getting a pay raise is a good indicator that you’re ready to pay off your loans faster, this isn’t the only thing that you should consider.

But You Won’t Be Eligible for Federal Forgiveness Programs

For a variety of reasons, you can apply for federal forgiveness programs that will either cancel your loans or lower the interest rates imposed on them. Those who qualify for these programs are volunteers, serve in the military, work in low-paying but high-need areas, and teach in low-income communities. But if you have already refinanced your loan, you cannot apply for forgiveness programs. You could be missing out on a golden opportunity to write off your loans immediately.

Many are overwhelmed with the refinancing process. You shouldn’t be. The scheme is meant to help you either finish paying your loans or apply for another one because of a financial emergency. The key is to read up as much as you can about refinancing and determine if this is the right route for you.