Second mortgage.

[Perrotfish]

A theoretical scenario, wanted to get an opinion from you guys).

So right now the average student owes an enormous, mortgage sized debt, with an interest rate of approximately 7.3%. At that interest rate, even on a 10 year plan, half of what you pay will be Interest, rather than paying down the principal. On a 20 year plan most of what you pay is interest.

Right now, the APR on a 10 year mortgage at a fixed rate to someone with a good credit score is less than 3%.

Most physicians buy homes despite their student debt.

So, upon graduation, does it make sense to buy a 300K home, with the explicit plan of immediately remortgaging it for another 300K to pay down the student debt at the much saner APR of a mortgage? Is that possible?

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[DrMidlife]

In my experience there's no double dipping. You can't borrow more than the FMV of the house. A 2nd could only be done on your equity in the house. The way they enforce this is by amending the title to your property with the lienholder(s).

Also, getting a low fixed rate on a 2nd isn't as straightforward as getting a low fixed rate on a 1st.

 

[nephappl]

No way,
Which sane bank (there are some still) would lend you money at a lower interest rate with virtually no collateral as let's say $300K unsecured loan on top of a $300K mortgage would put you on a loan to value of 200%? Furthermore 90+% of mortgages are guaranteed by either FHA, Fannie or Freddie and as far as I know and LTV > 100% is not guaranteed.
I am sorry to say this but renting and paying your student loan first makes more financial sense these days.
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