No More Student Loan! Fund College Education Using Mortgage

One of the biggest hurdles and obstacles facing home buyers today is student loan debt. 

What if you as a homeowner could help your family by using your mortgage as a financial tool to pay for a college education thereby avoid getting a student loan. In this post, we will learn the strategies and how you can implement them.

Most people when they think of college education, think of student loans. This can be a huge burden for first-time home buyers and making it difficult for them to buy a home because of this student loan debt. 

With that said if you are a homeowner and you have equity built up, why not use that equity to fund the college education and take that burden off of your family and allow them some flexibility for their future. 

There are two ways you can use your equity for funding college expenses. The first one is Cash-out refinance and the second one is the home equity line of credit (HELOC).

In most cases, Cash-out refinance is going to be the best option as it gives you an option to go for a fixed rate. 

In most cases, the interest rate on a cash-out refinance would be far lower compared to a student loan. The other reason that a cash-out refinance is a great option to fund a college education is because it is an amortized payment. 

Every single month that you are going to make that payment, some of the money is going to go to interest but the principal amount is also going down little by little over the term of the loan.

If you are planning to use HELOC to fund a college education, you need to know that they may look good on the services, however, they offer a variable rate. 

The other significant aspect you need to know about using HELOC to fund a college education is that it is going to be an interest-only payment. 

That is the reason why the payments might seem relatively lower compared to a cash-out refinance. 

Because of this, you might find yourself in a predicament where you are paying only the interest and the principal amount remains untouched.

To maximize your benefit using a cash-out refinance to fund a college education, you can combine that refinance with a term extension or a rate reduction. 

Since we have seen some of the lowest interest rates in the last few years, you can get a cash-out to fund a college education.

Depending on how long you have been paying on your mortgage, you might be able to keep your mortgage payment the same, or just have a minimal increase even with receiving a significant amount of cash from closing.