This question has been popping up a lot lately. Why? If you took out a loan through the CalSTRS Teacher Loan Program anytime in the last 5 years, you are probably coming up on your 5 year mark soon, which will mean your monthly payments on your 2nd mortgage are soon to begin.
You may already be paying them, or you are about to start. Home values have been going up all over the country especially in California. Depending on what part of California you live in would determine how much your values have gone up.
CalSTRS Refinance Opportunities
Unfortunately, until recently, people with CalSTRS Loans were finding it hard to refinance, mainly because of lower values. Bank of America is not very cordial when it comes to subordinating their 2nd loans to allow folks to refinance their 1st, so its become quite the stand still.
Now however, with values going up this is changing. Higher values across the state have made it possible for many people to consolidate their loans into one lower payment. Here is a quick overview of the CalSTRS Program in case your memory faded over the years…
- You have two loans, one at 80% of the purchase price, the 2nd at 17% of the purchase price
- Your interest rate on both loans is the same
- Your second loan interest has been accruing over the years (unless you were making payments)
- After 5 years, your 2nd loan becomes a fully amortized 25 year loan with principle and interest payments due
You can offset the increased cost of the 2nd payment by being proactive and refinancing your loan into one loan. Below is an example of how a consolidated loan may work for you.
So as you can see, by refinancing now, you can get a hold of your payment ahead of time while rates are still lower, and avoid the higher payment later.
If your property is not quite at 80% loan to value to completely avoid PMI (Private Mortgage Insurance), it can later be removed once your loan is paid down to the 80% level providing you maintain good payment history, therefore lowering your payment even more.
To see if a CalSTRS Consolidation Refinance would work for you, please feel free to give me a call or leave a comment below. You never know until you try!