Subsidized Loans - New Mortgage

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illinoisguy
Posts: 39
Joined: Fri Feb 14, 2020 2:45 pm

Subsidized Loans - New Mortgage

Post by illinoisguy »

I have a couple of student loans that I need to start paying back. Here is the breakdown:

Consolidated - Subsidized - $51k - 6.3%

Consolidated - Subsidized - $44k - 6.3%

Both are with Navient. So my questions is is there any way to reduce them besides starting to pay? Is 6.3% a good interest rate? We are getting ready to buy a new home.....is there any way to roll some or all of the student loan into the mortgage (20 year conventional...20% down).

Thanks!
Silk McCue
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Re: Subsidized Loans - New Mortgage

Post by Silk McCue »

You can’t get a mortgage that is greater that the value of the house. So no, you can’t roll student loans into the mortgage.

Cheers
surfstar
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Re: Subsidized Loans - New Mortgage

Post by surfstar »

Options to optimize:
Refi student loans to a lower rate
Take a 30yr mortgage, use extra monthly cash flow towards paying down student loans faster
Topic Author
illinoisguy
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Re: Subsidized Loans - New Mortgage

Post by illinoisguy »

Thanks! Two questions:

1. Where would I look to refinance my current student loan rate? What is the current rate right now? What are the pluses and minuses to doing this?

2. Is it possible to put less than 20% down on a conventional loan and use the difference to pay towards the student loans? What are the ramifications of doing so?
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RickBoglehead
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Re: Subsidized Loans - New Mortgage

Post by RickBoglehead »

illinoisguy wrote: Wed Jul 21, 2021 12:59 pm Thanks! Two questions:

1. Where would I look to refinance my current student loan rate? What is the current rate right now? What are the pluses and minuses to doing this?

2. Is it possible to put less than 20% down on a conventional loan and use the difference to pay towards the student loans? What are the ramifications of doing so?
You can put much less than 20% down, but you'll be paying PMI (private mortgage insurance). Have you been pre-qualified by a bank? They would show you the maximum loan you'd qualify for. Owing $100,000, unless you have very high incomes, is going to have a big impact on that.
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Topic Author
illinoisguy
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Re: Subsidized Loans - New Mortgage

Post by illinoisguy »

Thanks. Yes, we have been preapproved by Chase for $100k over what the contract price on the new house is.
nolesrule
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Re: Subsidized Loans - New Mortgage

Post by nolesrule »

illinoisguy wrote: Wed Jul 21, 2021 1:07 pm Thanks. Yes, we have been preapproved by Chase for $100k over what the contract price on the new house is.
They aren't going to give you a mortgage for $100k over the contract price unless the appraised value of the house supports it. Contract price + $100k would need to be <= 80% of the appraised value. Even then I don't know that they would do a cash-out non-refi first mortgage. You'd have to ask.

Get a 30 year mortgage and use the difference in payment to toward paying down the student loans.
exodusNH
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Re: Subsidized Loans - New Mortgage

Post by exodusNH »

illinoisguy wrote: Wed Jul 21, 2021 12:59 pm Thanks! Two questions:

1. Where would I look to refinance my current student loan rate? What is the current rate right now? What are the pluses and minuses to doing this?

2. Is it possible to put less than 20% down on a conventional loan and use the difference to pay towards the student loans? What are the ramifications of doing so?
1) You just find someone to give you a loan at a lower rate. Maybe the current company agrees to lower your rate instead. No minuses to refinancing at a lower rate. You just need to keep an eye on the loan costs to make sure you'll actually save money. You will probably have trouble finding a personal/unsecured loan for a 6.3% rate. (Student loans aren't easy to discharge in bankruptcy and so while they're unsecured, they're difficult to walk away from.)

2) Sure, but then you'll need to pay PMI until your equity is at 20-22%.

You could close on your mortgage, and then look into a HELOC. Most HELOCs are variable rate, but often have a 12-month teaser rate before resetting to prime + fixed. Whether that will be lower than your student loan rate long term is difficult to say. You could take enough from the HELOC that you're sure to be able to repay over the teaser term and use that to pay down one the loans, which will save you some money term. As an example, I have a HELOC that was at around 3% for the first year and then reset to a variable rate that's 6ish right now. If you know that you could repay $10,000 over the course of the teaser period, you could take the $10K and pay down the student loan (which will lower your overall interest payments). You will of course, then need to commit to paying off the HELOC before the rate resets while also continue to service your student loans, since the paydown won't reduce your monthly payment.

Keep in mind that buying a house winds up incurring a lot of unexpected expenses, for stuff like property maintenance (shovels, snowblowers, lawnmowers) to furnishings (curtains, blinds) to higher utility costs.
exodusNH
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Re: Subsidized Loans - New Mortgage

Post by exodusNH »

illinoisguy wrote: Wed Jul 21, 2021 1:07 pm Thanks. Yes, we have been preapproved by Chase for $100k over what the contract price on the new house is.
Preapprovals mean very little. That's just setting a cap for how much they would possibly loan you, and it's probably not even contractual. As nolesrule points out, no bank is going to approve a mortgage for more than the appraised and sale value of the property. You can't get preapproved for $800K, buy a house for $500K and and get $300K deposited on your bank account.

You would need to look at a cash out refi AFTER you close on your mortgage. But even then, that would only work if the house appraised for more than you paid for it.
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anon_investor
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Re: Subsidized Loans - New Mortgage

Post by anon_investor »

illinoisguy wrote: Wed Jul 21, 2021 12:59 pm Thanks! Two questions:

1. Where would I look to refinance my current student loan rate? What is the current rate right now? What are the pluses and minuses to doing this?

2. Is it possible to put less than 20% down on a conventional loan and use the difference to pay towards the student loans? What are the ramifications of doing so?
You should shop around for student loan refinancing, and just understand if you refinance with a private lender you will lose some of the protections offered by government issued student loans (like how loan payments/interest were suspended because of Covid). That being said, a couple of my friends refinanced their student loans with SoFi last year, no idea if they are any good or have a competitive rate, but that is at least one option.
exodusNH
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Re: Subsidized Loans - New Mortgage

Post by exodusNH »

anon_investor wrote: Wed Jul 21, 2021 1:26 pm
illinoisguy wrote: Wed Jul 21, 2021 12:59 pm Thanks! Two questions:

1. Where would I look to refinance my current student loan rate? What is the current rate right now? What are the pluses and minuses to doing this?

2. Is it possible to put less than 20% down on a conventional loan and use the difference to pay towards the student loans? What are the ramifications of doing so?
You should shop around for student loan refinancing, and just understand if you refinance with a private lender you will lose some of the protections offered by government issued student loans (like how loan payments/interest were suspended because of Covid). That being said, a couple of my friends refinanced their student loans with SoFi last year, no idea if they are any good or have a competitive rate, but that is at least one option.
And do this BEFORE you take out a mortgage so that your debt-to-income ratio doesn't look so bad.
Millennial
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Re: Subsidized Loans - New Mortgage

Post by Millennial »

nolesrule wrote: Wed Jul 21, 2021 1:14 pm
illinoisguy wrote: Wed Jul 21, 2021 1:07 pm Thanks. Yes, we have been preapproved by Chase for $100k over what the contract price on the new house is.
They aren't going to give you a mortgage for $100k over the contract price unless the appraised value of the house supports it. Contract price + $100k would need to be <= 80% of the appraised value. Even then I don't know that they would do a cash-out non-refi first mortgage. You'd have to ask.

Get a 30 year mortgage and use the difference in payment to toward paying down the student loans.
They won't give you a mortgage over the offer price even if the appraised value is higher. First mortgage amount (and LTV calcs) are based on lower of offer price or appraisal.
HootingSloth
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Re: Subsidized Loans - New Mortgage

Post by HootingSloth »

anon_investor wrote: Wed Jul 21, 2021 1:26 pm
illinoisguy wrote: Wed Jul 21, 2021 12:59 pm Thanks! Two questions:

1. Where would I look to refinance my current student loan rate? What is the current rate right now? What are the pluses and minuses to doing this?

2. Is it possible to put less than 20% down on a conventional loan and use the difference to pay towards the student loans? What are the ramifications of doing so?
You should shop around for student loan refinancing, and just understand if you refinance with a private lender you will lose some of the protections offered by government issued student loans (like how loan payments/interest were suspended because of Covid). That being said, a couple of my friends refinanced their student loans with SoFi last year, no idea if they are any good or have a competitive rate, but that is at least one option.
About a decade ago, my wife used SoFi to refinance student debt. Rates seemed very good at that time. I think their rates used to depend on which college/university you attended, but not sure if that is true anymore.
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surfstar
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Re: Subsidized Loans - New Mortgage

Post by surfstar »

anon_investor wrote: Wed Jul 21, 2021 1:26 pm
illinoisguy wrote: Wed Jul 21, 2021 12:59 pm Thanks! Two questions:

1. Where would I look to refinance my current student loan rate? What is the current rate right now? What are the pluses and minuses to doing this?

2. Is it possible to put less than 20% down on a conventional loan and use the difference to pay towards the student loans? What are the ramifications of doing so?
You should shop around for student loan refinancing, and just understand if you refinance with a private lender you will lose some of the protections offered by government issued student loans (like how loan payments/interest were suspended because of Covid). That being said, a couple of my friends refinanced their student loans with SoFi last year, no idea if they are any good or have a competitive rate, but that is at least one option.
Huge flag - OP are you or would you be eligible for PSLF? (public service loan forgiveness) If so, do not refi the loans. I would assume you'd already be aware of this if pursuing that option, though.
Otherwise, shop around for the best rate and go for it.
investuntilimrich
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Re: Subsidized Loans - New Mortgage

Post by investuntilimrich »

Big concern I see is you have multiple forms of debt going already this will likely impede your ability to save. Can you try to renegotiate the loan rates rather than lose your fedloan benefits?
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