So here you are. You have owned your home for some time now, and built quite a bit of equity in the house. But you have these student loans that just seem to be going nowhere. So you have thought to yourself, how can I pay them off? What if you could refinance your house and pay them off by restructuring your mortgage?
Let’s face it debt is debt. If I owe to creditor A, B, C, D, E & F I owe a sum total of debt. Per month that will equal of total outlay you have. Student loans may have a slight tax deduction for you on your tax return (consult your CPA). But the mortgage definitely does. Why should you consider restructuring your mortgage to pay them off? What if you could take the savings and start building your retirement faster? We all know compounded interest builds faster over time through growth. You can’t always make up for that later in life when your investing years shrink and you need to be prepared to retire.
In the past, when you refinance and take out equity (pay off mortgage, pay off other debt on a new first mortgage) it comes with a higher interest rate (about .25% on the whole mortgage) compared to the person who just refinances the balance of the mortgage (no consumer debts added to balance). Fannie Mae just announced that if you do a cash out refinance where at least one student loan is paid off, you will not be subject to that rate hit (for cash out). This is a nice change. So this will save you because on this refinance example you won’t see a higher interest rate on your mortgage.
How does this help? It is one way to get student loan debt paid off, consolidating your bills, increasing cash flow to apply to other areas of life.
Now your house can’t be listed for sale. The student loan must be yours. The proceeds must be paid directly to the student loan servicer. And you can’t partially pay off a student loan.
Right now this is just starting, the investors who service mortgages have to align their guides with Fannie Mae to roll it out.
If you have thought about this or have questions let us know.
Ray~
