It’s no secret the cost of attending college has become more and more expensive over recent years. Tuition costs and a whole host of other fees must be accounted for and, for many, paying for college with high-cost student loans is the only option. But for homeowners, there’s another way to help defray the cost of higher education. You can use a debt consolidation mortgage to save for your kids’ college by leveraging the equity in your home.
How To Save For Your Kids’ College With Debt Consolidation
As families begin to grow and the kids are getting older, paying for college is a looming issue. When trying to juggle the mortgage payment, save for retirement and pay off credit card debt, it can be difficult for many to squeeze in a little more savings for college. A debt consolidation mortgage can make it easier to boost that college fund by lowering overall monthly payments.
Calculate Your Debts and Interest
What exactly is a debt consolidation mortgage? It’s one new home loan that pays off other loans. The strategy is to take out a lower rate debt consolidation mortgage and pay off higher rate debt associated with credit cards and installment loans. To see how much you can save each month with a debt consolidation mortgage, carve out a few minutes of your time and do a little math. Get the current balances of all your credit debt and write down the interest rate associated with each individual debt.
Use our debt consolidation calculator to see how much you can save »
Get Your New Debt Consolidation Mortgage Terms
Next, add up all those credit balances, excluding the current mortgage, and average the array of interest rates. Add the outstanding credit balances to your current mortgage balance. This will be your new mortgage. Then, contact Homesite Mortgage for a current rate quote for a debt consolidation mortgage. Together we will compare what you’re currently paying on your non-mortgage obligations with what a new mortgage payment would be. The difference is the new mortgage will have a much lower rate than what credit card accounts and other installment loans will have.
When you go to the settlement table the new debt consolidation mortgage, the old mortgage will be paid off entirely, along with other credit card balances and installment loans. The difference between your old payments and new payment is how much you can save each month for future college expenses.
Start Saving for Your Kids’ College
You can simply open up a new savings account at your bank or open up a tax-friendly “529” plan. A 529 plan is a college savings plan that offers tax and financial aid benefits. The benefit with a 529 plan is that earnings are not subject to federal income tax and most state income tax guidelines. The funds can be used for tuition, fees, books as well as room and board. Depending upon your tax bracket, these savings alone can be considerable. This makes it even easier to use a debt consolidation mortgage to save for your kids’ college.
Your new mortgage balance will be higher than your previous one because you paid off those other credit balances with a cash out refinance. But because interest rates for mortgages are lower compared to other types of credit, your overall monthly payments are lowered. It is with these savings that you can place into your 529 plan each and every month. With some careful calculations and strategic interest rates, you can use a debt consolidation mortgage to save for your kids’ college.