Let’s take a few minutes to talk about refinancing…
The obvious reasons to refinance are to get a lower interest rate or consolidate your debt. However, we want to spend a few minutes today to talk about refinancing your mortgage to help pay for your kids post secondary education.
On average, it costs up to $80,000 to complete an undergraduate degree in Canada. This is a large sum of money if you do not have an RESP set up or some kinds of savings put aside.
One solution would be to use the equity you have built up in your home.
The benefit of refinancing is:
- Lower interest rate – The average student loan interest rate is at prime + 2.5%, making it 5.25% right now, while you can get mortgage rates under 4% for a 5-year fixed/closed mortgage.
Think about this tidbit of info – it’s called the “rule of 10”
- For every $10K in student loans, your child should earn about $10K over a base of $10K annually in order to pay off the loan 10 years
- For example:
- If your child took out a $80K loan, he or she would have to earn $80K on top of the $10K base, making that $90K annually to pay off the loan in 10 years
Most people don’t make this kind of money right after graduation, so it would take your kids a long time to pay off this debt.
If you can help your kids pay for this education, it will help with reducing the financial burden later on in their lives.
If you have any questions on refinancing, feel free to call us at 1-866-521-9557 or email at email@example.com.