Paying for College: Home Refinance or Not?

Page content

What Does Refinancing Mean Exactly?

Refinancing is when an existing debt obligation is replaced with a new one under different terms. Most commonly used for a home mortgage, people who refinance their homes receive a new mortgage at a lower rate typically.

Reasons for refinancing include:

- receiving a lower interest rate (lower monthly payment and a reduced term)

- to consolidate all debts into one loan

- to reduce risk

- to free up cash for other things


Basically, if you refinance your home then you will have more available money to put elsewhere. There are four positive aspects in refinancing your home to pay for college.

1) Type of rate can be changed- A perk of refinancing is that you can protect yourself from experiencing unexpected rate increases.

2) Lower monthly payments- This is an obvious positive, according to RIS Media - a leading provider in Real Estate news. Lower monthly payments mean more money in your pocket to go toward tuition bills and other school expenses.

3) Lower interest rates- The lower interest rates will not only give you lower monthly payments, but also a shorter repayment period.

4) Mortgage amount can be increased- This is the main positive to focus on when considering refinancing to pay for school. When you refinance, you can do so for a larger amount so you’ll have extra cash immediately. This is an efficient, quick way to receive money to send yourself to school.

By just reading the positives in refinancing your home, you may be ready to apply right now. However, there are also a fair share of negatives.


Refinancing your home to pay for school is one way to pay for your college education. However, it is incredibly important to weigh out all of your options before deciding to do something drastic like this. You’ve read the PROS of refinancing above, now here are the CONS.

1) Higher risk of penalties- Be sure to read all of the fine print when refinancing your house. It could be more trouble than it’s worth if you’re constantly at risk of penalties.

2) Refinancing can be costly (initially)- Depending on your credit score and a variety of other things, it can be incredibly costly to refinance your home. From closing costs to private mortgage insurance premiums, it can add up rather quickly. provides a great tool to check your refinancing costs.

3) Need to be more disciplined with budget- This problem comes with having more money in the budget. While this seems like a wonderful thing, if you’re used to having one set budget and it suddenly becomes drastically different, this takes some discipline.

Of course, the PROS and CONS vary in weight per person. The most important thing to when deciding whether or not to refinance your home to pay for school is to speak with an expert and explore your other options.