I kind of messed up and didn't pay my unsubsidized grad schools loans while I was in school, so I have quite a bit of interest accrued. In total there are 5 loans and they come to about $100k. All of the loans are currently in grace/deferment period. The far right column is accrued interest.
$22,900 @ 6.8% - $2,400 $ 9,700 @ 7.9% - $1,000 $20,500 @ 5.4% - $1,000 $27,000 @ 6.4% - $1,500 $16,300 @ 6.2% - $250
The loans will enter repayment in July. Right now I have a mortgage ($1,100/mo) and a car loan ($700/mo). I have $8,000 left on the car which I can payoff in the next month or two. Once the car loan is paid off I'm thinking about getting a home equity loan to pay off the high interest student loans. I would need to take out a loan for maybe $40k.
I can payoff the 7.9% loan with cash, and I can almost payoff the 6.8% and 6.4% loans with the home equity loan. This is only if I can get the home equity loan at 4% or less. My bank is advertising 3.8% and I have a good credit score so it should be possible.
My question is will the student loans which are in grace/deferment period affect my current debt to income ratio? My wife and I make $90k/year combined. I know if by debt to income ratio is high I may get a higher interest rate on the home equity loan or the bank may not give me the loan at all. Also our house is worth $130k, and we have $70k left on the house.
Also is this a good strategy overall? I checked into consolidating the loans, but the consolidated loan's interest will just be a weighted average.