The hot housing market eliminates some of the risks of using cash refinancing for student loans.

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Take advantage of the hot housing market and include your student loans with cash refinancing mortgages. (iStock)

Low mortgage rates do more value than just paying for your home in the home buying process. Mortgage lenders are starting to offer refinancing and first-time home buying products that can turn your student loan into your mortgage.

Converting a student loan to a mortgage loan, also known as a “debt reshuffle,” involves obtaining a cash-out mortgage loan to refinance and using that proceeds to pay off your student loan debt. While this method is controversial because of the risks associated with shifting the burden of student debt onto mortgages, homeowners in certain financial situations can mitigate these risks by taking advantage of low mortgage rates and the hot real estate market.

You can explore your mortgage options, visit Credible compare rates and lenders throughout the mortgage process.

Pros and Cons of Refinancing a No Cash Mortgage

Traditional Risks of Converting Student Loans to Mortgages

1. Waiver of federal student loan allowances

Obtaining a federal student loan offers certain protections and benefits for the borrower:

  • Repayment plans: The federal government provides repayment plans as a percentage of the borrower’s income to help lower monthly payments.
  • Loan Forgiveness: In some situations, borrowers may be forgiven, canceled, or repaid from their student loans. There are several different options for forgiveness.
  • Patience Agreement: This option allows borrowers to temporarily suspend or reduce monthly student loan payments based on accrued interest. Patience usually lasts up to 12 months.
  • Deferral agreement: Borrowers can suspend or reduce payments without accrued interest.

Including student loans in your mortgage could mean that you will lose access to these benefits.

2. Putting the house at risk

Student loans are unsecured debt, similar to an individual loan, which means there is no collateral to secure the loan. Your mortgage is a secured loan, such as a car loan, and is secured by your home.

Adding a $ 30,000 student loan to your 4.5% mortgage for 15 years means you will pay an additional $ 230 per month in mortgage payments. When you increase the amount owed while working to pay off your mortgage, you run the risk of not being able to make payments and losing your home.

3. Pay more interest

Take a close look at the numbers, otherwise you might just be paying more interest by adding student loans to your mortgage. Even if you receive a lower interest rate after refinancing, you can still pay more interest if the due dates are extended.

A hot housing market mitigates all of these risks. When refinancing with cash out, you can only cash out up to 80% of your home equity, and due to rising house prices, the risk of foreclosure is much lower.

You can visit Credible to pre-qualify without affecting your credit score.

WANT TO REFUND THE GRADUATE STUDENT LOANS? THIS IS HOW TO DO IT

Should you get cash-back refinancing?

2006 to 2021 average interest rates on federal student loans we:

  • 4.66% for undergraduate student loans
  • 6.22% for Graduate Study Loans
  • 7.27% for parents and graduate students receiving a PLUS loan

By incorporating student loans into your mortgage, you can reduce the number of monthly payments. When your student loans are split among multiple lenders, it can be very helpful when working to pay off your debt.

Refinancing with a cash advance can also allow you to extend the term of your student loan; however, when considering this option, pay close attention to equity and credit health. A bad score means your FICO score is between 300 and 579, while a fair score means your score falls between 580 and 669. Once you score 670 or higher, you at least fall into the good credit category. …

THAT’S WHY MORE EMPLOYERS OFFER HELP IN PAYING STUDENT LOANS

Visit an online marketplace like Credible to view refinancing rates and get cash to pay off your student loan debt.

What other options do you have?

If cash-in refinancing is not right for you and your personal finance situation, there are other options, such as refinancing a student loan. Here are a few pros to consider when refinancing student loans:

  • Change your tariff plan
  • Lower monthly payments
  • Reduce your interest rate
  • Reduce the number of debt payments
  • Free an accomplice
  • Get another loan officer

You can still take advantage of today’s low-rate environment by refinancing your mortgage to save on debt payments. Because the rates are so low, homeowners can save money over the term of their mortgage through refinancing.

DO YOU HAVE $ 100,000 STUDENT DEBT? 5 WAYS TO HELP PAY

Refinancing can potentially save you thousands of dollars, and given the current housing market, there is no better time to refinance your mortgage or student loan debt.

Visit Learn More Reliably About Private Student Loan Options and get customized rates from multiple lenders without affecting your credit score.

Have a financial question but don’t know who to contact? Write to the Safe Money Specialist at moneyexpert@credible.com and your question can be answered by Credible in our Money Expert column.

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