Refi student loan at a *higher* interest rate to free up cash?

5 Replies

Hi BP community - I am looking to save for a downpayment for an investment property (my first after purchasing my home) however I have heavy student debt ($175K+) at a 4% interest rate. In order to improve my financing capabilities, it is wiser to:

A) Refinance at a *higher* rate (no more than 5%) to free up cash? 


B) Continue paying down my current rate to improve my DTI and wait to purchase until I have less debt?

Thanks so much weighing in!

Don't do it.

I assume option A also increases the loan term length in order to reduce the monthly payment.  You will pay drastically more interest over the course of the loan if you choose option A.  The ONLY time it may make sense is if the increase in cash flow will allow you to make an investment that you wouldn't have otherwise been able to make to pay off your student loan in 1-3 years (it won't, it's not enough money).

I say the same as the top two. Pay down that debt or other debts asap.  Then finance. 

You could also find deals and sell them off to someone in a double close to make extra money. 

@Jenny Gardner yes I mean wholesaling.  You can also find someone who buys frequently and find them deals for a price that you predetermine.  You might even work out an equity stake if the deal is great.

Good Luck