Should You Use A Cash-Out Refi To Pay Off Student Loans?
Nearly 44 million Americans account for $1.4 Trillion in student loans.
Fannie Mae is offering those with houses an opportunity to wipe out their student loan debt through refinancing their mortgage. An estimated 8.5 million households could potentially benefit from this program, which is titled the Student Loan Payoff ReFi.
You can cash-out up to 80 percent of the value of the property, not to exceed a $636,150 loan in Orange and Los Angeles counties without any of Fannie’s expensive pricing markups normally charged on an 80 percent loan-to-value, cash-out refinances.
The Refi will pay down the student loan by disbursing payment directly to the servicer of the student debt. This allows people to pay off student loan debt, leaving them with one loan at a low rate.
Typically, student loans carry a much higher rate than mortgages, making it better for borrowers to have more mortgage debt and pay off their student loans. Current 2017-2018 Student loan rates range from 4.45% to 7%. (source) Private lenders, meanwhile, offer student loans with interest rates that range from 3.9 percent to 12.8 percent based on the borrower’s credit and whether there is a co-signer.
The cash-out refinancing option makes the most sense when the new mortgage rate is substantially lower than the rate on the student loans. Homeowners with older government loans at much higher rates or those with pricey private loans could do well under the program
Even though mortgage rates have ticked up in recent months, they remain historically low. If you are considering paying off your student loans with the Student Loan Payoff Refi, you should take advantage of the current markets rates as they are forecasted to go up.
Contact a friendly and professional Loan Officer at Franklin Loan Center today for more information!
