How to Refinance Student Loans Into Your Mortgage


In this post. we discuss how to refinance student loans into a mortgage without it being considered a cash out refinance. Did you know that if you take cash out of your home in a refinance, the interest rate is higher? But, there is an exception with student loans, and there are some details you need to know.


*The following transcript has been edited for clarity.

Eddie — I’m Eddie Knoell.

Tom — And I’m Tom Knoell.

Eddie — Welcome everyone. This is the Mortgage Brothers Show and we have something exciting today. A little known secret, I say it’s not a secret, but…

Tom — Kind of.

Eddie — It’s a guideline. It’s a guideline allowance for conventional refinances and student loans.

Tom — And I bet you there are loan officers out there that don’t even know this.

Eddie — Yeah.

Tom — I don’t know what the percentage is, but it’s… I think it’s probably more than we think. So we want to share this little nugget, little tidbit.

Eddie — That’s right. If you have student loans, which if you’re 40 years or younger and you’ve been at school, there’s probably a 90% chance you still are repaying student loans.

Tom — That’s right. If you have a heartbeat, more than likely you have a student loan.

Eddie — Yeah. And a student loan’s something that’s interesting. There’s no such thing as bankruptcy for student loans. You cannot roll them into a bankruptcy, a chapter seven. The courts will not allow it.

Tom — Yeah. As much as people try, as much as people whine and talk about, they will not. That’s a protected class, so to speak, within the debt world.

Eddie — Yeah. So they have to pay them off no matter how long it takes unless you qualify for some government special program that’ll pay it down. But most people pay off their student loans, and it takes a long time. If you have a home and you want to refinance your house, generally speaking, most people will consider it a cash out refinance. If you think about, most people can and I want to take out some cash.

Tom — That’s right. Hey, what do you want to do? I want to take out cash in my home to pay something off. Oh, that’s a cash out.

Eddie — Yes, and cash out refinances have a little bit higher interest rate.

Tom — Okay, so basically in short, you can pull money out of your house and pay off your student loans, and have it priced as a non-cash-out refi. The big restriction here is that you pay off an entire student loan. If you have one student loan, you have to be able to pay the entire thing off, in order for you not to get hit with a cash out price hit. If you have four loans you can pay off two of those loans, three of those loans even, and have it not count as a cash out refinance if you pay 100% of those three loans. You cannot take a portion of any remaining money from your so-called cash out and pay off the fourth loan.

TomAll the money that is pulled out of the home has to pay off 100% of, whether it’s one student loan that you have or two of four that you have, or three of four that you have. Does that make sense? There is no partial payment.

Eddie — Yeah, that’s right. They want you to pay off the whole pie of one loan. You can’t have a remainder-

Tom — That’s right.

Eddie — And put it in your pocket. You have to pay off one student loan. If you’re going to pay off two, you have to pay off two complete student loans. No partial payments.

Tom — Right. Exactly. If you were to make this analogous to eating pies and you had five pies, you’d have to eat… This sounded really good when I started. You’d have to eat however many pies in total that you plan on eating.

Eddie — Once you start eating a pie, you have to finish it.

Tom — You have to finish it. That’s right.

Eddie — And that person can go to 80% loan to value

Tom — All right, awesome folks, you have a good week.

Eddie — Hey guys, thanks for listening to the Mortgage Brothers Show. Please let us know if you have any questions you’d like us to answer on this podcast. You can email your questions to or yours truly at And be sure to ask us for a free quote on your next mortgage. Tom and I will personally work with you and help you through the whole process.

Signature Homes LLC does not provide tax, legal, or accounting advice. This material has been prepared for informational purposes only. You should consult your own tax, legal and accounting advisor before engaging in any transaction. Signature Home Loans NMLS 1007154. NMLS# 210917 and 1618695. Equal housing lender.