Fresh Prince wrote: Joe Quincy wrote: guano wrote:
Fresh Prince wrote:Last tip.
If you have good credit and a sizable amount of cash for a downpayment, buy a house. When applying for a mortgage, ask for the bank to increase the size of the mortgage to pay off the student loan. If there's the right combination of real estate value in the property, equity from the down payment, and size of loan payoff, a bank will definitely consider this (I encountered success with Wells Fargo in the past).
1) Lock in interest at around 3.5% interest.
2) Take advantage of those nice tax deductions related to home ownership and mortgage payment.
3) Combine your "rent" payments and "student loan payments" in one.
This is definitely advantageous if you can score property with a ton of investment upside.
The only con I could think of at the time was that if the government offered some sort of comprehensive student loan forgiveness program, you wouldn't be able to take advantage of it because your loans would no longer be "student loans."
Actually, you're losing money on the transaction. That extra cash you were sitting on should have been used to pay down your loan rather than sitting in savings earning you 0.25%
Not to mention, this violates FHA rules as well as, I believe, Fannie/Freddie rules unless your loan to value ratio stays under the limit (it definitely can't exceed the value of the property). So you're not likely to succeed if the bank plans to sell off the mortgage or have it underwritten. If it does stay under the limit, you may as well have simply paid off the loans with the cash and taken out a mortgage for 95% of the house or whatever. I don't think it would even save you P&I insurance because of how they calculate it.
Keep in mind it's pretty hard to score a mortgage for 95% of purchase price. In my experience, 20%-25% DP is the magic range, unless you're getting an FHA loan.
Exactly. That's why this plan isn't feasible. While it would have worked in 2007, it just won't pass the new rules.
If you have 40% of the purchase price to maintain the ratio and have enough equity for them to pay off the loan (assuming it is 20% of the home value), why wouldn't you just pay off the loan and finance 80% of the house. Pre-crash, many banks would loan 120%+ of the home value assuming it would appreciate. Now getting 90% is like pulling teeth.
The only scenario I see this working in is if your parents, etc sold you the house at a discount for tax purposes. Then you'd be buying it for less than its value and would instantly have equity that could be tapped.
Sure you could maybe do this if you had like $5K in loans but the savings wouldn't really make it worth the effort. If you have $200K in student loans, you'd need a hell of a down payment to have enough equity.