By Ryan Weeks on 2nd November 2016
SoFi and Fannie Mae partner on new product to help homeowners pay down student debt more cheaply, using equity in their homes.
SoFi, the online lending platform for millennials, has teamed up with Fannie Mae to provide homeowners a new option for reducing student debt. The new product – the Student Loan Payoff ReFi – allows homeowners to refinance mortgages at a lower rate while simultaneously paying down the balance of an existing student loan.
The product effectively allows customers to roll their mortgage and student debt repayments into one, lowering rates in exchange for using equity in their homes as security. As part of the refinancing, SoFi pays down the student loan of a customer directly to the servicer of the debt. The ReFi product carries a maximum loan to value ratio of 80 per cent..
"People can pay off student loan debt and are left with one loan at the low rates that mortgage borrowers are enjoying in today's market," explained Michael Tannenbaum, senior vice president of mortgage at SoFi.
The new product could help an estimated 8.5 million US households to pay down or completely pay off student debt obligations. It’s being pitched to homeowners who manage their own student debt or to those who have co-signed loans, which often involves parents.
According to Experian, the average homeowner with outstanding cosigned student loans has a balance of $36k on those loans, while those with outstanding Parent PLUS loans have $33k in debt.
"The nation is seeing record-low mortgage rates and our partnership with SoFi is just one way that Fannie Mae is able to support current and future homeowners that have student debt," said Jonathan Lawless, vice president for product development and affordable housing at Fannie Mae.
The new product will be available to SoFi members and the public from today in states where SoFi holds mortgage licences. SoFi branched out into the mortgage space in late 2014, later launching a consumer loan offering in 45 states in February 2015.