Refinance helps couple pay off student loan debt in Concord

Loan adviser: Jim Valler. Property type: Single-family home in Concord. Appraised value: $450,000. Loan amount: $360,000. Loan terms: 30-year fixed at 4.25 percent with no points. Backstory: Life can change a lot in five years. In April 2011, a couple closed on a family home in Concord at $306,000. The buyers — fresh out of college and starting careers — benefited from a Federal Housing Administration loan requiring they provide a 3.5 percent down payment.

Since then, the market surged and the appraisal value went into orbit. Pair that with a stable credit line and a refinance is all but a given.

In this case, the couple leveraged a $360,000 cash-out refinance to wipe out student loan debt.

At the same time, the original mortgage’s 5 percent APR was chipped away to 4.25 percent.

Income the client earned during paid maternity leave proved essential to the deal’s success.

There was a time when paid maternity leave weren’t included inthe borrower’s assets, the interpretation being the client might not return to work. Identifying and removing the discriminatory policy paints the clearest assessment possible of a client’s true economic situation.

But the maternity leave bridge wasn’t sufficient. Fortunately, a recently added guideline allows a borrower to supplement maternity leave pay with liquid reserves like checking, savings and money market accounts.

Valler, who arranged the financing terms for the original purchase, was tabbed to guide the refinance. Valler and the family put together an “asset depletion” analysis to demonstrate that the client’s assets could provide supplemental income that was enough to fill the gap until she returned to work full time.

The client paid off $55,000 in student loans through the refinance process. And it gets sweeter. The total amount borrowed was less than 80 percent of the appraised value, which translates to no mortgage insurance.

Home appreciation and lower rates set the stage for the client to improve her financial situation, but it was Valler’s knowledge of a rather esoteric income guideline change that brought the refinance to a successful conclusion.