Have you ever considered surrogacy as an option for family building but then balked at the towering costs?
You're not alone.
Surrogacy is a premium assisted reproductive solution, one that normally requires hiring a qualified gestational carrier, a reproduction attorney, engaging the services of a reputable IVF clinic and several other miscellaneous costs such as background checks, medical screening, medical insurance, in addition to providing for all pregnancy related needs of the surrogate.
Most people therefore, find considerable ease and cost-saving in hiring the services of a surrogacy agency. The broad range of logistical support, coordination and above all, peace of mind, provided by a surrogacy agency is why most intended parents opt for the agency route instead of independent surrogacy.
Having said that, surrogacy undoubtedly comes with a hefty price tag that a lot of people find difficult to afford. But that does not diminish their need for having a child which is why, a lot of families have to consider various loan options to finance their surrogacy journey.
Apart from all the personal and fertility loans available in the market, you can also manage to release funds for surrogacy by carefully re-evaluating your current debt situation and lines of credit.
Cash-out refinance
A cash-out refinance pays off your current mortgage by replacing it with another home loan, one that is typically higher than your home loan balance. Naturally, one can only opt for a cash out refi if they have positive equity in their home. For instance, if your house is valued at $400,000 and your remaining mortgage balance is $200,000, you own $200,000 equity in your home. With cash-out refinance you can apply for a new loan amount, say, $250,000 and get the $50,000 difference in cash to cater for your financial needs.
In addition to being able to access a lump sum amount immediately, a cash out refi also gives homeowners a slightly lower interest rate than the original mortgage interest rate, a reason why most homeowners use this option.
Pros
- Fixed, low interest rate
- Long repayment period
- No prepayment penalty
- Debt consolidation: Paying of high-interest debt obligations with funds from a cash out refi could save you thousands of dollars worth of interest payments. This can also help improve your credit score
- Use funds for urgent, pressing financial needs
Cons
- Higher interest payments as your loan amount increases
- Closing costs are typically worth 2%-5% of the mortgage - make sure what you need the funds for is worth this cost
- Foreclosure risk in case of failure to make payments
- New terms: Your new mortgage would have terms different from your original loan, so make sure the math makes checks out.
HELOC (Home equity line of credit)
Another option that is often compared to cash out refi is that of HELOC or home equity line of credit. HELOC is essentially a second mortgage in addition to your existing home loan, with its own terms and amortization schedule. In contrast to cash out refi, HELOC has zero to very low closing costs making it an attractive option. However, home equity loans and lines come with higher interest rates than cash out refi and higher monthly payments due to the relatively shorter repayment period (typically 10 or 15 years).
Pros
- Zero to negligible closing costs
- Works like a credit card, you pay interest only on the amount you withdraw and not on the total equity available in your line of credit
Cons
- Higher interest payments due to a shorter repayment period
- Variable interest rate that rises or falls according to certain indexes and margins (e.g. the U.S. Prime Rate) set by the lender
Retirement accounts
Withdrawing from your workplace savings account, like 401(k), 401(b) or IRA gives you instant access to funds (up to $50,000 within a 12-year period in case of 401(k) for instance) from your own savings.
Since this saved-up amount is generally meant to be used for your retirement years, one reason why these accounts are tax-advantaged, there are certain restrictions that generally discourage pulling out funds from these accounts before you reach your retirement age. However, financial emergencies such as exorbitant medical bills, tuition fees or disability, are some examples of a financial hardship in which case one can withdraw from their 401(k) before 59, without the fear of paying penalties. Since infertility and surrogacy can qualify as a medical hardship, it's probably a good idea to discuss with your employer if you can do a hardship withdrawal on your 401(k).
An option similar to an early 401(k) withdrawal is that of withdrawing from your Individual Retirement Account. Since loaning money from the IRA is not allowed, withdrawing a certain amount if you're under 59½ , commonly known as an IRA distribution, is a viable alternative that releases funds for extraordinary pressing needs or hardships, without penalties. If you are considering to withdraw from your IRA to get funds for surrogacy or any other assisted reproductive procedure, you should be able to do so penalty-free if your unreimbursed medical expenses are more than 10% of your gross income for that particular year. In case of a 401(k) withdrawal, that figure goes down to 7.5%.
Pros
- Instant access to funds for an urgent financial need
- You avoid taking a loan
- You're not required to pay back the withdrawals, unlike a loan.
Cons
- Heavy taxes
- 10% penalty fee in case in case you fail to prove your financial need as a pressing hardship
- You lose out on future earnings
No-Low Interest Rate Credit Cards
A 0% APR or low interest rate credit card will help reduce the cost of your debt. Simply put, with little to no interest rate (for as long as 20 months for some credit cards), this option helps you pay back your borrowed amount quicker since you're paying so little in interest.
Pros
- You pay absolutely no (or extremely low) interest rate during the introductory period
- Perfect for big purchases
- Since there is no cost of borrowing initially, you pay out your balances faster if you manage your money responsibly.
Cons
- Significantly shorter repayment window as compared to the loaning options discussed above
- Once the introductory 0% APR ends, the interest rate would revert back to a regular one so be careful if you'e carrying a balance close to the end of your card's intro period
- Card issuer reserves the right to end the 0% APR period sooner if you continue to make late payments, sometimes even resulting in a penalty APR!
Fertility loans
Another great option for funding your fertility treatment or surrogacy is that of choosing from a wide range of fertility-specific financing options. Programs like Prosper Healthcare lending and New life fertility finance provide extensive coverage options for your fertility expenses such as medical treatments, procedures, medications and in some cases, even travel. The latter in fact has an option for financing the medical insurance coverage of a surrogate pregnancy specifically. CapexMD also offers a fertility financing option that partners with egg donor and surrogate agencies. Lastly, our list would be incomplete without the following: - Lightstream - FutureFamily Lending - Lending Club Pros - Very low initial interest rates - No prepayment penalties - Retain Your Existing Credit Sources Cons - Can only be used to pay for your treatment - Could potentially have very high interest rates after the initial zero/low interest rate period
The financial commitment that comes with surrogacy is admittedly, a huge consideration. Nevertheless, with in depth research and evaluation of your current financial situation, you can carefully devise a strategy on how you can fund your surrogacy journey, without breaking the bank. Talk to your employer as well as your lender about the different options available to you for doing a comparative analysis on what will best serve your funding needs.