Student Loan

Can You Use Your Home Mortgage to Help Pay Down Student Loans?

Today Americans are struggling more than ever with student loan debt. As of 2017, student loan debt surpassed total credit card debt by $620 billion. Interest rates on federally subsidized student loans are relatively low, but borrowers with higher-rate, private loans may struggle under the burden of student loan debt. One of the options to help these borrowers may be to roll their student loan debt into their mortgage debt.

With mortgage interest rates still hovering around historic lows, utilizing that borrowing power can help many Americans lower their monthly bills. Rolling student loan debt into a new mortgage or additional home equity loan can help to reduce monthly payments. The difference in the borrowing cost may mean that some borrowers can cut their monthly student loan payments by more than half their current payment. In addition, the interest paid on mortgage debt and home equity debt is both federal income tax deductions. Unlike the student loan interest deduction, there is not a low limit on the amount of mortgage interest borrowers can claim each year on their federal taxes.  Currently, as of this post, those limits are much higher for mortgage interest deductions as compared to the allowable student loan interest deductions. So, borrowers receive the added benefit of lowering their taxes each year. This may be particularly beneficial for higher income families that reach the maximum allowable student loan deduction each year.

There is, however, a potential downside to rolling student loan debt into a mortgage. Lenders typically have a variety of options to assist borrowers who are having trouble making monthly student loan payments due to unemployment or other temporary financial hardship. Rolling student loans into mortgage debt mean losing that financial flexibility. Mortgage lenders don’t offer the same payment flexibility. As a result, borrowers facing temporary financial difficulties risk losing their homes in foreclosure due to having the additional burden of their student loan debt rolled into their mortgage or home equity debt.

Combining student loan debt with mortgage debt can save borrowers hundreds of dollars each month. This is especially true for borrowers with student loans that are not federally subsidized. Borrowers should be aware of both the benefits and potential risks before deciding to use this cost-saving strategy.  California Platinum Realty and Loans helps eligible borrowers reduce their monthly payments by evaluating opportunities for reducing or eliminating student loan debt and rolling it into lower interest rate mortgages.  Ask us what we can do for you.