Restructuring debt by refinancing your student loans can be a way to afford your home mortgage. Spending a few extra years paying off student loans or other debts could qualify you for lower interest rates or higher mortgage amounts down the road.
If you refinance, you can save money on additional money that you borrow, since a traditional mortgage has a lower interest rates than a home equity loan, and you can probably qualify for a lower interest rate on the balance that you are already owed. You might be able to roll over part or all of what you owe on your adjustable-rate home equity loan into a fixed-rate loan. Personal loans are generally unsecured, but they carry higher interest rates than HELOCs and cash-out refinance.
Personal loans typically have a much shorter repayment term and higher interest rates than home equity loans, making them an inferior option for this scenario. Some lenders sell personal loans that are designed specifically to be used in very small homes or mobile homes. You may have trouble finding a traditional mortgage lender that will loan you the money you need to finance a tiny home or mobile home. Unsecured loans are harder to get, and the interest rates can be higher since lenders are largely based on your credit and other financial information to determine whether or not you are eligible for the loan. Unsecured loans do not require a security deposit to qualify. Remortgage is another term for refinancing, which is the process of paying off your current mortgage with a second mortgage from a new lender, typically with a lower interest rate or better terms. A second mortgage is another loan taken out on the property, which is already mortgaged.
If the property has been appreciated, a remortgage is one way of getting cash out and paying it off over a longer term. When you first bought the property and took out your new mortgage, you may have had around 80% loan-to-value with 20% down. Loan-to- value (LTV) is calculated as your current outstanding loan balance divided by the property's market value. Each payment, which is the same every month (if a fixed-rate HELOAN), includes the interest charges as well as some loan principal. You borrow a certain amount, and then you pay regularly over a fixed period of repayment. If you can put away 20% or more of the money upfront, then the student loans alone are much less likely to impact your borrowing experience. HELOs typically carry lower interest rates than other types of loans, and the interest may be deductible. If you cannot afford the down payment, and cannot afford to take out a personal loan, your state may have first-time homebuyer programs that will help you afford a down payment. If you have exhausted cash in an emergency fund, you may want to borrow against your HELOC to cover house repairs, medical bills, or other unexpected expenses. While the rules of borrowing may seem onerous at times, they are there to protect you from taking on debt that you cannot afford to repay. You will also improve your borrower savvy by learning about the differences between secured and unsecured debt, and between fixed and variable interest.