Millions of Americans struggle to consistently pay their student loans. What if there is a way to use one of your most valuable financial assets — your home’s equity — to aggressively pay off your student loans?
Turns out, you may be able to do just that. Let’s break down how to use home equity to pay off student loans.
Yes, you absolutely can. In fact, it could be the best choice for you.
The more you pay off the principal of your mortgage loan, the more you own your property outright. You build equity in your property by paying toward this principal. In other words, your equity is the difference between your home’s worth and how much you owe on your mortgage (plus any other liens). That equity can be used as a financial tool, such as collateral for various loans.
However, you can also use home equity to pay off student loans by “cashing it out” and then putting the money directly toward your student debts.
A student loan cash-out refinance is a new mortgage that you take out over your current mortgage. In other words, it’s worth more than the remaining mortgage principal. You pay off your current mortgage with a higher balance refinance, then use the difference to pay off your student loans.
Student loan cash-out refinance mortgages do have some terms and conditions:
Imagine you have a home valued at $300,000. Your remaining mortgage principal is $200,000. Meanwhile, you have $40,000 in student loans.
If you take out a student loan cash-out refinance of $250,000, you can pay off the remaining mortgage balance, pay off your student loan, and still have $10,000 of money remaining.
In many cases, it can be. You might consider using home equity to pay off your student loans if the following apply to you:
Keep in mind that when you are agreeing to any type of refinance, the term of the loan is restarting. Depending on the loan term you select, you may return back to a 30-year term.
You don’t just have to use a student loan cash-out refinance. You can also access your home’s equity and pay off your student loans by:
Co-owning your home with Balance could be the best method for using home equity to pay off student loans.
When you contact Balance, we look into your home's equity, and, depending on its condition and the market, we may decide to take out an equity investment in the property. This means we become a co-owner of your property.
With the mortgage loan replaced by an equity investment, homeowners take out an average of $50,000, which could be just what you need to pay off your student loans. What’s more, you don't compromise your homeowner status. You remain the homeowner and don’t have to move.
In place of a mortgage, you make a monthly payment to Balance to cover your occupancy and your share of the insurance and taxes.
All the while, we remain invested in your property over the long term. Balance has helped many individuals struggling under the burden of student and other loans — all without incurring the same risks as other home equity access methods.
Overall, using your home equity to pay off student loans could be a smart idea, particularly if you work with Balance. In contrast to other equity access options, Balance lets you stay in your home, stops any risk of foreclosure, and maximizes your available income to pay down as much of your student loans as possible.
Want to know more? Schedule a call with Balance today.