Should You Sell Your House to Pay Off Student Loans?

By Tom Burchnell
Should You Sell Your House to Pay Off Student Loans?

What do the more than 43 million Americans who are currently struggling with student debt have in common, aside from their red ledgers? They’re all looking for ways to earn extra money, tackle their debt, and improve their financial health. Americans have to get creative when it comes to tackling a private or federal student loan debt. But should you sell your house to pay off student loans?

It may be a viable option. However, it’s essential to evaluate your current financial situation and consider other options before making a big financial decision.

In this guide, we’ll explore the factors to consider when determining whether to use your home equity to pay off student loans, how to calculate your equity to debt ratio, and finding alternative financing options to a home equity loan for debt consolidation

1. Is Your Current Mortgage a Problem?

One reason many people choose to sell their home to pay off debt like their student loan debt is because of the financial constraints of carrying a mortgage. High-interest rates, giant balloon payments, and hefty monthly fees can put a strain on even the most balanced budget. 

With so much of your income tied up with your mortgage, it can be difficult to maintain control of your personal finance. In some cases, you might find yourself behind on mortgage payments

Advantages to Consider

For that reason, selling your home and using the cash to wipe out your student debt can be a good idea if:

  • Your current mortgage payment is too great – If your current mortgage payment is unmanageable, selling your home can be a good option. You may be able to finance a new home at a better rate, which may make it easier to keep up with your loan payments and your mortgage costs.  
  • Your mortgage is keeping you from your loans – If you find yourself repeatedly missing your student loan payments or struggling to find room for them in your budget, ditching your mortgage can free up funds that are getting in the way. 

Drawbacks to Consider

On the other hand, selling your home may also come with unexpected drawbacks, such as: 

  • You might not get a better mortgage rate – Unfortunately, cutting ties with your current mortgage in favor of a new one doesn’t automatically mean you’ll find a better rate. Mortgage rates are in almost constant flux, tied to unpredictable factors like federal policy, the strength of the economy, and inflation. For example, 2020 and 2021 were characterized by historically low mortgage rates of around 3% for 30-year, fixed-rate mortgages. Unfortunately, rates in 2022 are approaching 5%—and experts expect them to continue rising.
  • There are costs to selling your home – Once you factor in the cost of things like real estate brokers, closing costs, and improvements and repairs to get your house ready for the market, selling your home can get pricey. Depending on your situation, the costs might outweigh the potential benefits. 

2. Do You Want to Move?

To a large extent, answering the question, “should I sell my house to pay off student loans?” depends on whether or not you want to move. That said, for many, the freedom to relocate is an enticing perk of selling your home. This can be especially true if:

  • Relocation offers other benefits – Moving to another city or state can be a good idea for those who stand to reap career benefits when relocating. If another location offers better pay, benefits, or a better position, selling your home to pay off your loans could open other doors to financial stability. 
  • You want to move – Beyond seeking out new career opportunities, moving is an opportunity to start fresh and chase new adventures. If you’re not happy where you are or have always wanted to live somewhere specific, now might be the time to make the leap—especially if your private or federal student loans have been holding you back.

3. Have You Earned Enough Equity?

Although one of the biggest benefits of homeownership is the equity it provides, you don’t build that equity overnight. It takes years of on-time mortgage payments to increase your share of ownership—and even then, depending on your mortgage type, it may not be enough to pay your bills. 

Before you sell your house to pay off student loans, think about:

  • Whether you have the equity – What is your equity to debt ratio? Even if you don’t have enough equity to pay off your entire debt, taking care of a significant portion of it may be worth selling your home—or it may not be.
  • Whether you’ll have early repayment fees – It might seem like paying off debt is a good thing, but a lender may charge fees for paying off your mortgage debt early. Before you sell your home, determine if these fees are a viable option for you. 

Additionally, the value of equity isn’t only measured in cash. Having equity can:

  • Help build long-term wealth
  • Make you a more desirable loan candidate 
  • Help with emergency expenses 

How to Calculate Your Equity to Debt Ratio

To calculate your ratio, subtract your outstanding mortgage balance from the value of your home. The difference is your equity. Then, divide the outstanding mortgage balance by your equity to find your ratio.

For example, if your home is currently valued at $500,000 and your mortgage balance is $350,000, your equity is $150,000. When you divide $350,000 by $150,000, your debt to equity ratio is 2.3. This means that you owe $2.3 for every $1 you own.

The lower the number, the more equity you have, which puts you in a better financial position.

Regain Your Financial Footing with a Sale-Leaseback

Selling your home to pay off your federal or private student loans is one solution, but it may not be the best solution based on your current financial situation or needs. After all, your house isn’t just a financial asset—it’s a home. 

Through a sale-leaseback program, you can convert your home equity to cash without having to move out. You can sell your home, freeing yourself of your mortgage debt and continuing to live in the house as a renter. As a result, you get the time and money to pay down your student loans and meet your financial goals.

Key Takeaways

When it comes to selling your house to pay off your student loans, there are many pros and cons to consider. If moving isn’t an option for you or you don’t want to leave your home, there are many alternative solutions you should consider (like a sale-leaseback to convert your home equity into cash). If you are still unsure about what the best option for you is, consult your financial advisor before making any decisions.


Education Data. Student Loan Debt Crisis in America (by the Numbers).

Investopedia. The Most Important Factors Affecting Mortgage Rates.

Business Insider. Average Mortgage Interest Rate by Credit Score, Year. 

Forbes. Here Are Today’s Mortgage Rates: April 1, 2022—No Movement on Mortgage Rates. 

U.S. News. How Much Does It Cost to Sell Your Home? 

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Tom Burchnell
Written by Tom Burchnell
Director of Product Marketing

This article is published for educational and informational purposes only. This article is not offered as advice and should not be relied on as such. This content is based on research and/or other relevant articles and contains trusted sources, but does not express the concerns of EasyKnock. Our goal at EasyKnock is to provide readers with up-to-date and objective resources on real estate and mortgage-related topics. Our content is written by experienced contributors in the finance and real-estate space and all articles undergo an in-depth review process. EasyKnock is not a debt collector, a collection agency, nor a credit counseling service company.