The numbers:
Current Mortgage is a 15-year mortgage with about 10.5 years left, at 3.75%. House is worth about $135K and mortgage balance is about $68,000, but we could only cash about about $40,000 in equity if we refinanced and kept 20% in equity in the home to avoid PMI. Based on my research, I think we could refinance to a new 15-year at 2.75%, so saving a full percentage point.
Student loan balance is about $69,000 at 4.50%, so cashing out would knock it down to $29,000.00. I would hope we could knock that out in 18 months.
Alternatively, we could wait another six months, and between higher equity and lower student loan balance, we could probably knock the student loans down to under $23,000 with this move.
Pros and cons? I know a mortgage is a secured debt, but it's not like the student loans are just going to disappear, so does it really make much of a difference? If I defaulted on my student loans, my wages would be garnished, and we'd likely have to sell our home anyway.
Almost a 2 point difference between the current student loan rate and what we could probably get on a refi. Plus, all of our interest on the mortgage payments would be deductible, while student loan interest deduction is capped at $2500 and it phases out at higher income levels.
Any feedback on this?