Can You Consolidate Your Student and Mortgage Loans? Here’s What the Experts Have To Say
Most Americans find ways to manage their debts efficiently. From their credit card debts to car and salary loans, the Americans are looking for ways to consolidate these debts into one big loan to minimize their interest rates. Can millennials do the same thing for their student loan debts and mortgages? The good news is, financial experts say you can get this option.
Refinancing Your Mortgage Loans
According to financial experts, most Americans carry the burden of paying two major debts during most of their lives: the mortgage and student loans. According to the Federal Reserve‘s latest report this year, the student loan debt increased to an astounding $1.5 trillion, trailing behind the mortgage loans with a staggering $9 trillion.
The renowned mortgage loan company Fannie Mae offers the student loan cash-out refinance feature for mortgage investors with student loans. This option enables the investors and applicants to pay off their student loan debt by refinancing their mortgages. The company then will waive the loan-level price and cost of price adjustments depending on the borrower’s risk factors like the debt-to-income ratio and credit score.
Though it might seem good to eliminate another debt and reshuffle it into one debt, the financial experts advise that debt reshuffling is not magic. You’ll still owe the same amount of money as you had in two debts. However, you’ve just changed the terms of payment and conditions as well as the interest rates.
According to Everyday Millionaires financial coach Chris Hogan, debt shuffling enables you to get rid of your student loan faster by attaching that debt to your home’s equity. Hogan encourages borrowers to think carefully before making this consideration.
The major benefit you get from refinancing your mortgage is that you can significantly reduce the interest rates you pay for your student loan debt. As a borrower, you can potentially save more money compared to those who pay their subsidized federal student loans.
According to the latest report, the average interest rate for a 30-year fixed mortgage was at 4.41% in August 2018 compared to a subsidized federal student loan at 5%. While the direct unsubsidized loans were at 7.7% and the Direct PLUS loans is at 8%. Despite the higher interests rates, the financial experts say that most student loans are only payable for 10 years (or shorter terms) compared to mortgages which usually spans up to 30 years.
The challenge in consolidating student and mortgage loans, however, is that the fine print document paperwork can become confusing or misleading. According to Greenberg, there might be some hidden fees or arrangements buried in the fine print which may end up costing you more than just paying your student loans.
Greenberg adds you should talk to someone you can trust to prove to you whether or not the rolling out option is better for your finances or not. It’s also important to seek advice from someone working independently in the industry so that their views won’t be biased compared to consulting a company who offers mortgage refinance.
Losing Your Protection
Aside from the costs, you should also be prepared to lose your valuable protection should you decide to consolidate your student and mortgage loans. According to Greenberg, you’ll most likely give up your inherent benefits if you roll out your student loans.
For example, you may apply to have your student loan deferred in case you lose your job. This means you can stop paying for student loans, or your payment will be reduced if you refinance your student loans. However, you won’t be eligible for the federal loan forgiveness program.
More in Loans & Credit
Shattering The Myths Surrounding Real Estate Careers
Real estate is a lucrative career, there’s no denying that. But while it promises great money, it also brings along some...September 21, 2020
Two Retirement Dangers That You Have to Solve Sooner or Later
Retirement is a totally new life for anyone, moving from a congestion of ideas and persistent work to complete calm and...September 17, 2020
Here’s Why You Should Seriously Consider Refinancing Your Home Mortgage
If you’ve heard of mortgage refinancing but never really understood it, allow us to give you the simplest explanation for it...September 17, 2020
Basketball Sensation Dwight Howard Lists His D.C House on the Market
One of the most glamorous sports of all time is basketball. The sheer number of NBA fans across the world is...August 7, 2020
Big Budged: First Lady Melania Trump Has Some Reconstruction Plans Up Her Sleeves For Rose Garden
Melania Trump is ready to step into the limelight as a “traditional First Lady” with her recently disclosed plans of revamping...August 3, 2020
Legendary actor Anthony Hopkins Makes Huge Profit on the Sale of his Malibu Beach House
There would hardly be a movie buff who hasn’t watched, easily one of the most brilliant masterpieces of Anthony Hopkins, “Silence...July 29, 2020
Tristan Thompson Returns His Encino Mansion to the Market Less Than a Year after Buying It
It seems that flipping houses isn’t a hobby only A-list actors from Hollywood sport. Famous singers and even broadcasters like to...July 29, 2020
7 Must-know Property Investment Tips for Beginners
Real Estate investment is gaining a considerable amount of popularity as a means of passive income in the year 2020. Making money through investing in...July 29, 2020
After Two Years of Remodeling, Diane Keaton Finally Tosses her Tucson Desert Villa on the Market for $2.6 Million
The American actress, Diane Keaton, has a keen eye for aesthetics and real estate. Famous for featuring in all-time favorite movies like...July 22, 2020