Should I refi the house or the student loan?
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  1. #1
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    Default Should I refi the house or the student loan?

    The entire purpose of this discussion is my student loans. I have about 66K(paid down from 130k) left and they are VARIABLE INTEREST! The variable interest has been amazing for the lat 10 years. I was paying somewhere in the neighborhood of 2.5% for the last 10 years. In the past 2 months the rates have risen to over 4.1%. Im scared to death they could easily rise to 6-7% in short time period.

    two scenarios to lock in my student loans interest rate.

    Refi the House
    123,000 1st mortgage at 3.875, payment $1000 25 years left
    21,000 second mortgage at 5.5%, payment 200 12 years left
    student loans 66k @4.12 variable, payment 650 10.5 year left

    Total out of pocket per month 1850

    Refi the house down to 15 years for 208,000 @ 3.25, payment 1700 15 years left.
    Left over student loan 15,000 $150 per month $150

    Total out of pocket 1850 Same payment. I cut 10 years off the house but extend the student loans 5 years and the 2nd mortgage 3 years. Tax advantages because I make too much money to deduct student loan interest. $3500 closing cost.


    Or refi the student loans and pay a bit more interest.
    Refi student loans 66,000 at I think it was close to 5% FIXED payment was $680 per month.

    So an additional $30 per month. No tax advantages for extra student loan interest.


    what are your thoughts.

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    Refi the House
    $208,000 for 30 years, 4% to 4.5% fixed rate - about $1000/m (If there is a closing cost, fold it into the mortgage).
    Use the $64,000 cash-out from the house to prepay most of the $66k SL. (I would find a way to raise $2000 to clear the entire loan, eg, refi a car, use a credit card, etc).

    That takes your monthly loan payments from $1850/m down to about $1000/m.
    Use the extra $850/m to build your wealth - eg, $850/m invested at 11%/yr for 30 yrs = $2.2M
    And the house will be paid off the same year that the fund hits $2.2m.

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    I'd agree with Old Guy, here, it's probably your best bet to refi the house and then use that cash to wipe your student loans completely. Kill two birds with one stone, so to speak! Makes your life easier, too, only having the one payment / debt to manage.

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