Student Loans

Consider expediting the repayment of your student loans to free up cash flow for other financial goals like saving towards a down payment for a home. You can also explore the option of consolidating your student loans with a mortgage when purchasing your first home, effectively managing both debts simultaneously.

KEY TAKEAWAYS

• Paying back student loans ahead saves money on interest.

• Student loans usually have low interest rates, while home prices often increase annually.

• You can save money easily to reach your goals.

  Saving for a down payment.

  • Home ownership may be cheaper than renting based on location, home type, and finances.

  • Postponing home purchase for debt may raise housing costs, rates, and rent.

  • Student loans have longer repayments and lower rates than other debts.

  • Consider saving for a home with a down payment to reduce mortgage costs over repaying a low-interest student loan.

  • You may qualify for student loan forgiveness or income-based repayment to lower payments.

    Repay student loans promptly.

    Reasons to pay off your student loans first include:

    • Postponing paying off student loans leads to increased interest. Repay debts early to save on higher interest.

    • If your student loan rate is variable, be ready for rate changes increasing expenses over loan duration, causing financial burden.

    • Paying off student loans clears debt from credit report, positively impacting credit.

    • Debt can significantly impact mental health, leading to stress and anxiety for many individuals. This has prompted some to choose purchasing homes without relying on loans or credit to ensure financial peace and stability.

    • Interest paid on student loans, up to a maximum of $2,500 per year, is considered tax-deductible according to current regulations. This deduction provides a beneficial financial relief to students and their families managing educational loan payments.

      Calculate Down Payment Savings Needed

      To ensure you steer clear of additional charges, opting for a 20% down payment when securing a loan is highly advantageous. It's crucial to note that a reduced initial payment may result in an increase of 0.3% to 1.5% in loan costs and private mortgage insurance (PMI). By choosing the 20% down payment route, you can potentially save a significant amount in the long run.

      Federal Housing Administration loans require a 3.5% down payment, offer competitive interest rates, but necessitate mortgage insurance for buyers. On the other hand, the U.S. Department of Veterans Affairs provides service members with loans that require zero down payment along with additional perks. Various alternative low down payment programs exist to assist buyers, including the Conventional 97 loan which facilitates borrowing of up to 97% of the home's value.