Bought a new home and haven't sold current home - effect on financial aid?

I am a current junior at a LAC and applying for aid next year. Currently filling out the CSS Profile. My yearly family contribution for the past 3 years has always been around $12,000 - $14,000. (COA at my school is almost $60,000.)

My parents have decided to buy a new home with a mid-range 6-figure market value; but we are taking out loans for the majority of it (down payment was only 5 figures because our savings had been 5 figures). We were left with VERY little money left in our bank account. However, we have not sold our current house which we’ve been living in for a decade (it’s worth a lot less than new house).

I am worried about how this will affect aid, and I have no idea how to fill out the CSS Profile without screwing myself over. We are still living in our old home and plan to move in the next 3 months, and I’m not sure which one to put as our “home”, and which one to put as our additional real estate that isn’t our “home” so that my chances of getting more aid is higher.

And if I write the new house as our primary “home,” would I have to change my permanent address correspondingly? This is problematic, as I still haven’t technically moved? Or maybe I should just wait until the April 15 deadline?

Basically the question the financial aid officers might have is: why are you willing to take out loans for a new house but not willing to take out loans for tuition? I don’t want them to hit us hard with loans instead of grants for my last year when I’ve always received majority grants and very little loans.

How do you think this will affect my aid and how can I minimize the damage?

P.S. I’m not certain but I think my school takes home equity into account.

Any chance you can file this Profile…and your FAFSA BEFORE your parents actually own the two houses? Like today?

If they have already purchased a new home…the equity in the secondary residence WILL be considered an asset for financial aid purposes. Whichnever house that is!

You need to find out for sure, because it could inform any decision on how you manage this situation.

Have your parents actually closed on the new home, or have they just made the decision to buy it without yet completing the purchase?

@thumper1 how heavily is equity vs cash weighed? Say the down payment was 70k. What’s the difference in having 70k cash vs 70k equity in the new home?

I’d think putting down whichever home has more equity in it as primary residence would be more beneficial financially.

If the parents own two homes, you can’t just pick which one you want to use as the primary residence for financial aid purposes. You have to report the primary home as the one which, you know, the family is actually using as the primary home.

They are closing in on the deal literally today. We’ve already bought some furniture for it. I think I might just put the new house down. Otherwise, wouldn’t it look like we have extra cash in our savings? That’s worse than having the money used up and having less money in savings, right? @thumper1

@BelknapPoint I checked, and they said they only take a small, standard portion of home equity into account, whatever that means. That means it shouldn’t have a big impact, right?

Put it down as what? If your family has moved into the new house at the time you complete the financial aid forms, sure, report it as your primary residence. But then you will need to report all the equity in the old house, if you still own it, as an asset.

@BelknapPoint Since we are still living in our old house, I would have to report the new house as an additional property, right?

I was thinking since we took out almost all of it as loans, then, best case scenario it’s no different from having the money that we actually paid in our bank account, except that in this case it’s not available as cash since it’s used up.

Yes, if that’s the situation on the day that you complete the forms. And really, if your school considers primary home equity in its need-based financial aid decisions, it won’t make any difference. The equity in your old (still primary) home will be counted, just as it was before. And the equity in the new home, which is probably just the down payment amount, will be reported as well, just as that amount was reported as an asset previously when it was in a bank account.

What are the chances that the old home sells and closes before you need to submit FAFSA? Would it be worth waiting a bit on that possibility or does the profit from the sale give you more of a problem?

If you can wait until you sell the current house, I’d do that. It is likely your parents have a bridge loan and will take the equity from the sale of the current home and redo the mortgage on the new home once the old home is sold. There will be a lot of shifting assets in the next few months.

Since you are not a freshman, your school might work with you as it is just a timing thing. Ask them.

What will happen to any profits from selling the old,home? If they will be in your bank account…that’s just another form or asset.