Pay down mortgage with Stafford loans?

[Dr Turninkoff]

I am a first year med student and recently decided to buy a property using my own funds for the down payment and stafford loan money for the mortgage payments. I have enough extra unsubsidized stafford loan money that conceivably I could pay off the property over the next for years. My interest rate on the mortgage is 6.75% fixed (no-doc). Has anyone decided that it would be in their best interest to pay down their mortgage early with stafford loan money? My concern is that although I'm building additional equity, if I sell before paying off the mortgage (if I do residency somewhere else for instance), then the interest I paid on the additional stafford loans will not be worthwhile. Anyone else had experience with this? Any insight would be appreciated.

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[Dr Turninkoff]

just thought i'd give it another go. any real estate people out there?

 

[THP]

I don't think it is that good of an idea unless you can pay the interest that is accruing on your unsubsidized loans while you are in school. While you will gain the equity on your home, the interest you accrue on your student loan may ultimately excede the equity. It also depends on the housing market and how much you expect your house will increase in value.

Generally, both types of loans are good to have because the interest you pay is tax deductible in either case.

 

[Dr Turninkoff]

I don't think it is that good of an idea unless you can pay the interest that is accruing on your unsubsidized loans while you are in school. While you will gain the equity on your home, the interest you accrue on your student loan may ultimately excede the equity. It also depends on the housing market and how much you expect your house will increase in value.

Generally, both types of loans are good to have because the interest you pay is tax deductible in either case.

as a medical student with no income, don't you lose all of the benefits of tax deduction?

 

[oudoc08]

as a medical student with no income, don't you lose all of the benefits of tax deduction?

Essentially, yes. The only reason to have a mortgage interest deduction is if you itemize. The only reason to itemize is if the standard deduction isn't going to be as beneficial, and as a med student, unless you're working in the summer, and part-time during school, it's doubtful that you're going to make over the $7950 that you are allowed tax-free.

The exception here would be if you had a spouse that worked full-time, and thus caused you to have a significant tax liability which could be lowered substantially with itemization thanks to a healthy chunk of mortgage interest and property taxes.

 

[Dr Turninkoff]

Essentially, yes. The only reason to have a mortgage interest deduction is if you itemize. The only reason to itemize is if the standard deduction isn't going to be as beneficial, and as a med student, unless you're working in the summer, and part-time during school, it's doubtful that you're going to make over the $7950 that you are allowed tax-free.

The exception here would be if you had a spouse that worked full-time, and thus caused you to have a significant tax liability which could be lowered substantially with itemization thanks to a healthy chunk of mortgage interest and property taxes.

yeah, thanks tony, that's what i was thinking. no spouse here though.