Sunday, 05 April 2020

How to Pay Off Student Loans to Buy a Home

Written by Posted On Monday, 24 February 2020 08:29
How to Pay Off Student Loans Quickly How to Pay Off Student Loans Quickly

How to Get Rid of Your Student Loans Faster to Purchase a House

Do you have student loans that you would like to pay off? Is your goal to get them paid down as soon as possible? You are not alone! Student loans are often seen as a barrier to buying your first home.

It can be tough to keep up payments on a student loan, pay the rent, and save up to buy your first house. One of the most prudent things to do is to pay off your student loan fast. But how do you pay off your student loan as quickly as possible?

If you would like to purchase a house, there are a couple of simple ideas that you can try. One of them, making overpayments, may even raise your credit score. Let's take a look at all of your options for getting your student loans paid off in a timely fashion.

Make Extra Payments to Ditch Your Student Loan

It would be great if you could save money for a down payment on a house, and pay off your student loans at the same time. But, most of the time, you will find yourself fighting a challenging battle.

It is a better idea to focus on paying off your student loan. Interest rates on savings accounts are low, and you are probably paying a higher rate of interest on your student loan. Financially, it makes sense to deal with your student loan before you start saving to buy a house.

If you have missed payments in the past, there may be an even greater need to get this debt squared away. Keep in mind that one of the most significant determining factors in getting excellent mortgage terms is your credit score. If your credit score is suffering because of missed payments, you'll be hurting yourself in the long run.

What you should do is get a free credit report to see where you stand financially. Is all of the information accurate? Are there things you can do to immediately work on your score? These are essential considerations.

One of the best ways to get rid of your student debt quickly will be to make extra payments. It is not very difficult to set up extra payments through your loan service provider. Make it clear to your provider that you want the additional amount to go towards your loan balance every month. Sometimes, a lender will apply the current overpayment to the next's month payment.

Refinance Your Student Loan

You can also refinance your student loan. When you have an excellent job and a good credit score, you could try refinancing your student loan. Use a payment calculator to check how much you would save by paying a lower interest rate.

Just to give you an example, if you are paying 8.5% on your loan, you would be better off paying an interest rate of 4.5%. That would allow you to perhaps make extra payments and pay off your mortgage faster.

Take a look around, and you will find that many lenders are offering low-interest options.

Auto-Pay Will Save You Money

Private lenders, as well as federal student loan services, offer auto-pay. This means a lender will automatically debit an agreed amount from your bank account every month in exchange for a small drop interest rate. The drop may only be a quarter of a percent but will make your loan that little bit less expensive. And yes, you can agree to make an "overpayment" every month. This could have a positive impact on your credit score

Pay Off Your Student Loan Bi-Weekly

One of the best ways to pay off a student loan is going with a bi-weekly repayment plan. Just like when purchasing a house, paying a mortgage bi-weekly will save you in paying mortgage interest. If you pay half of the monthly amount of your loan every other week, you will end up making one extra payment per year. By doing so, you will pay down the loan quicker. That may not be a lot, but when it comes to paying off a mortgage, every little bit helps.

Look at Accrued Interest

Take a close look at your student loan account, and try to figure out how much interest the loan accrued when you were busy studying. On most student loans, you will start to accrue interest from day one. The amounts are added monthly or annually during your time in college or university. If you have some spare cash, pay it off as it will reduce the overall debt of your student loan.

Loof For Repayment Plans

Federal student loans are generally based on a 10-year repayment plan. But, there are different ways to pay off your federal loan. You can extend the loan period, or you can choose an income-driven payment plan. In other words, the more you earn, the more you pay off your student loan.

If you can afford it, it is always best to stick to the fast track option to becoming debt-free. That is usually the 10-year plan. Hopefully, you can make extra payments.

Use Extra Money For Paying Down The Debt

If you run into some additional money, consider using it to make an extra payment. You don't need to put all of it towards your student loan. Saving some is a good idea, and you may even want to take a short vacation. Starting a side hustle is something else you should consider. The income from your side hustle can be used to make extra payments.

Also, look into if your employer offers a loan repayment plan as a benefit. Many do, and if your employer offers this as an incentive, you should go for it.

Paying down your student loan and saving for a home purchase may not always go hand in hand, Remember that it is always a good idea to try to get rid off debt before applying for a mortgage.

You might even consider using a site like Credit Karma that will help you with your overall financial picture. Not only do they supply your credit report and score, but give some trustworthy guidance on where you can build your credit. You can see an excellent comparison between Credit Karma and Credit Sesame in the resource at RISMedia.

Final Thoughts on Paying Off Student Loans

Finally, getting rid of your student loan debt is a great feeling both for parents and kids. Having a plan for getting rid of your debt, no matter what it is, can be extremely beneficial. Hopefully, you have enjoyed the advice for paying off your student loans.

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If you enjoy any of the above articles for buyers and sellers, please consider sharing them socially to spread the word.

About the author: The above article on how to pay off student loans to buy a home was written by Bill Gassett. Bill is a nationally recognized Real Estate leader who has been helping people buy and sell Metrowest Massachusetts real estate for the past thirty-three plus years. Bill has been one of the top RE/MAX Realtors in New England for the past decade.

In 2018 he was the #1 RE/MAX real estate agent in Massachusetts. His real estate advice has been featured on CNBC, RIS Media, National Association of Realtors, Today.com, Inman News, Placester, Credit Sesame, and others.

Bill covers real estate sales in the following Massachusetts communities: Ashland, Bellingham, Douglas, Framingham, Franklin, Grafton, Holliston, Hopkinton, Hopedale, Medway, Mendon, Milford, Millbury, Millville, Natick, Northborough, Northbridge, Shrewsbury, Southborough, Sutton, Wayland, Westborough, Whitinsville, Worcester, Upton and Uxbridge MA.

Reach out for his advice anytime.

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Bill Gassett

One of the top RE/MAX agents in New England over the last decade plus. Providing exceptional real estate services to buyers and sellers in the Metrowest Massachusetts area including the following communities: Ashland, Bellingham, Douglas, Framingham, Franklin, Grafton, Holliston, Hopkinton, Hopedale, Medway, Mendon, Milford, Millbury, Millville, Northborough, Northbridge, Shrewsbury, Southborough, Sutton, Wayland, Westborough, Whitinsville, Worcester, Upton and Uxbridge MA.

See my real estate website at Maximum Real Estate Exposure - one of the most visited real estate sites in Massachusetts.

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