<p>In many places, including where I live in CA, people stretch beyond reason to buy a house in a good neighborhood with a decent school district, that many have little to no furniture! Chairs from Target and finer furnishings from Ikea. Taking out a home equity loan and increasing monthly patments just isn't an option.</p>
<p>I know 3 families who sold the house to pay for college. Hello condo!</p>
<p>zagat, if they stretched beyond reason to afford that home in the school district of choice, it is unlikely they have any equity in that home to worry about. If on the other hand they plunked down $100,000 (or more) in cash for a down payment-well,that $100,000 COULD have been used for college tuition I suppose, or invested in another asset. Or at least that is how the argument goes.</p>
<p>What gets to me is all the weirdness and variations. Just as a "fun" exercize , it will take less than 15 minutes-go to the collegeboard institutional calculator,the Princeton calculator and the Dartmouth calculator. Plug in an AGI of $100K, plug in $150,000 of home equity, de minimus other assets. See what you get at each then explain it to me (other than "they do what they do -we don't do it that way"). This is with a simple calculation that affects every homeowner. Throw in some truly weird stuff and you won't have a clue till the ink dries on the financial offer.</p>
<p>Curmudgeon: I'm lazy! What were the results when you plugged those numbers in?</p>
<p>Curmudgeon, it's probably difficult for anyone who has not lived the California insanity to understand the reality here. You stretch (and let me tell you people lie to get the loans) to buy the house. Many are paying half or even more of take home for the monthly mortgage. It is not at all unlikely that your house is worth 25% more than you paid one year later. In great years, there was 50% growth. So you are wealthy on paper. But you can't take money out and pay higher monthly payments for long. If you have younger kids you don't want to trade down in school districts because even the best in CA are pathetic compared to the rest of the country.</p>
<p>Talk about being stuck between a rock and a hard place!</p>
<p>(psst, anxiousmom. Don't tell anybody but Princeton is 10k a year cheaper than Dartmouth for a family with $150,000 in home equity and a family AGI of $100,000. Throw in the supposed no loans packaging at Princeton - and it could be way more than that in real aid.)</p>
<p>Zagat, since the 80's Texas has received 100's of Californians who cash in their housing lottery money and move to cheaper environs. I have a good friend who lived in San Francisco and moved to Contra Costa and bought a 3 br 3ba house for what his condo cost in the city. Sold that house 5 years later and came to Texas (where he started) with $500,000 in his pocket. I had owned a home for the same period of time (eight years). After remodeling expenses were deducted my home sold for a "profit" of about 3% a year. After sales costs I netted less than $10,000. If people have only lived in California, they really don't understand, either.</p>
<p>At the same time, I have invested in a ranch. Why is my ranch treated differently than your house? It's all a balancing game. Tip O'neill had an oft qouted line "All politics are local." I have cynically changed that over the years to "all politics are pocketbook". Where a person will stand on most of these EFC issues is probably not much different. Some schemes benefit me, some will benefit you. It's really all just some giant puppetmaster game and we're all just dancing away.</p>
<p>ugghh, after reading my response to Zagat, it may not communicate what I wanted to communicate and may appear to be a rebuttal, of sorts. It was not. It was intended to be a statement that because of where we live and what we do, which were all decided without regard to college admissions, we all have issues with this money stuff and the way these FA folks wield the sword cuts somebody out every time. Sometimes you, sometimes me, sometimes that guy behind the tree but somebody ain't going to feel it's cut fairly. Every time. Our job as I see it, is to figure this stuff out to see how to best take advantage of the arbitrary and capricious system they have put in place. If you have $500,000 in home equity and $100k AGI, I'd suggest Princeton over Dartmouth.</p>
<p>You know, curmudge - for a guy who is as thoughtful and kindhearted as you, that "curmudgeon" handle is beginning to look like an out-and-out-fraud. I may just start a thread on "Re-naming curmudgeon." I'm thinking along the lines of teddybear, sweetasapplehoney, pushover, softspot..... You get the idea :)</p>
<p>jmmom, I kinda like "sweetasapplehoney".</p>
<p>Everyone - and I do mean EVERYONE - should believe what "THEY" say about financial aid: home equity and salary over the 6 figure threshold, you'll get nothing unless you have multiple kids in college or huge medical expenses or some other $$$ circumstance. If you have your own business and deduct your magazines, and furniture, artwork, car, etc., you could do ok.</p>
<p>On the other hand, with PHAT stats, eye-popping ECs, & a fancy app, the merit aid can flow like honey. S's cumulative total was $524K, I would bet some on this board got offered even more.</p>
<p>In fact, parents, why don't you add it up and post? It will be very useful information for next year's group.</p>
<p>:) sweetsasapplehoney. Uh huh. That's what I was thinking too.</p>
<p>OK, I'll take Princeton!! One small question, will Princeton take us?</p>
<p>Here's the thing about CA. You hate like nothing else shelling out your soul for a house that resembles a homeless shelter in most states. But then you realize the appreciation beats the stock market and everything else you could have inveated in. By this point it's home, and you really love the great weather, You just can't win!</p>
<p>
Yes, that does appear to be a fatal flaw in my master plan, doesn't it? Hmmm. Back to the lab.</p>
<p>Please get the plan right. I only have two. How hard should it be for two bright, spunky kids to slip in? I mean it's New Jersey!</p>
<p>Curmudgeon,
As someone with a median-level income living in California, I don't think you really do understand the situation. 17 years ago my ex & I managed to scrape up a down payment to buy what real estate agents call a "starter home" in a working class neighborhood. It's a tract home, about 1100 sq. feet that was put up in the 50's - our house is pretty much original condition. We divorced & I bought out my ex with a 2nd mortgage. Then I refinanced - I owe more now than I did when the house was purchased - and I barely qualified for the refi. The house has tripled in value -- but there is no where to go. It's high value is still significantly below median in our county - meaning that there is no where to trade "down". Rent on a small apartment would probably be double what I pay on a mortgage. Move to Texas???? What would happen to my income -- my job is in California. </p>
<p>I'm not complaining - I'm happy in my little home -- but the equity really is a piece of fiction, since I need a place to live, wouldn't qualify to borrow against the equity, and I can't spend a house. Plus - there is no guarantee that next year the home value might go down -- as far as I am concerned personally, I don't care if it does, my goal is simply to have the house paid off by the time I hit retirement age. </p>
<p>Back when I was practicing law, I represented a lot of clients who had gotten in trouble during the last California real estate boom in the 80's - they had repeatedly borrowed against property to leverage its value against purchases of other property -- then when there was a set back in value in early 90's, their little empires came crashing down -- they couldn't meet the payments on their loans -- and my job was basically to negotiate with the various lenders to try to avoid foreclosure. (These people generally lost their property - as a practical matter, I was trying to prevent them from having to pay costs and fees in excess of the value of the property - if I could talk the lender into taking a deed to the property "in lieu" of foreclosure, it was a victory). </p>
<p>Obviously I am not going to make the same mistake of seeing pie in the sky because the neighbors across the street sold their house for so much.... I'm still living in mine, and its true value is whatever it will be if and when I sell. Given the reality: I can't afford a better place, and I can't even afford a worse place -- this simply is not an asset that is discretionary or disposeable. </p>
<p>College financial aid should at least provide an exemption amount, based on median home prices for the state or region where the family lives. Those figures are readily available - so I think a fair figure would be to exempt something like 75% of the median home value for the area in weighing home equity -- even if the exemption were only 50% of median value it would leave me with a much more reasonable figure to report as "excess" equity.</p>
<p>calmom, have you considered the possibility of selling your home to an investor and retaining a life estate since all you are interested in is the place to live and not the appreciated value? You could continue to live there and the investor takes the risk of any decrease in property values and you achieve either a payoff of your existing note or a lump sum cash amount, both of which would help fund college without costing you a cent (other than that equity which is not important). I'm sure that the numbers would be substantially smaller but-if the equity is not important anyway, might as well get some use out of it. (BTW,to the non-attorneys out there. Don't try this, it's just an example used to make a point.)</p>
<p>Curmudgeon, no offense intended, but that's about the stupidist suggestion I ever heard of. What "investor" in their right mind would want to buy a home subject to a life estate for someone who might easily live in the home another 40 years -- when they could easily purchase a similar property and own it? Certainly not a bone fide investor. And where would I be if circumstances forced me to move - for example, if I got a job offer that involved relocation, or if I got old and sick and needed to move to an assisted living facility? Then I'd have nothing. </p>
<p>The point is - to me the value of the home is as a HOME. I don't care if market values go down, because the house is always going to have an exchange value in approximately the same market standing as it does now. That is, if my house loses 20% in value, it is likely that every other house in Northern California is also losing 20% in value -- if and when I sell, I would always have basically the same range of alternatives in terms of where I go to live after that.</p>
<p>calmom, I was just trying to flush you out. And I did. You value that equity, not just being able to live in that house. You just don't want to show it. We're all being asked to make huge sacrifices . Those of us with small service businesses are expected to pay a % of value that doesn't exist. You are being asked to pay a % of value that does exist but you don't want to. I don't want family farms included but they are. Get realistic .You are not any more or less abused than the rest of us.(and BTW, I can probably find you an investor that'll give you 10 cents on the dollar for your equity and future appreciation. That's my point. You don't want to sell that equity that cheap because it does have value. Just like the Profile says.)</p>
<p>curmudgeon- re: post # 3; we have experience with Vandy, Emory and Tulane, and Tulane does offer merit aid based on stats only. It is in their literature, and we found it to be true. Case Western offers $ purely based on stats also. These are not dependant an rank or GPA but SAT scores only.</p>
<p>jax, that would be great. I've been to all those sites and what I recall is that the major awards say, 1/2 tuition and above are limited and insanely competitive. Is there an SAT merit calculation scheme per se at those schools or just Tulane?</p>
<p>But you are missing my point, Curmudgeon. I can't borrow on my home equity, because I don't have enough income to make higher payments. Selling the home would leave me with a bundle of cash, but I'd have to commit a bunch of that to paying rent somewhere, because my income isn't really enough to pay current rents in my area. So you are right in a sense - if I sold the house I would qualify for more financial aid, because a big chunk of my "equity" would go to capital gains taxes and real estate commissions. </p>
<p>But the point is - a California family living in a beat up old house in a lower class neighborhood that is valued at $500K is not really better able to fund a private college than a Texas family living on a big spread valued at $200K. On paper the California family has more - but the value of a home that is the family domicile really needs to be assessed in terms of its exchange value in the current market. Any other real property can be rented out to produce income - but not the family home. A family with a higher income might qualify to borrow more against their equity -- but that's irrelevant, since any family with decent credit can borrow 100% of the cost of college with PLUS loan - so home equity is not needed. But my ability to borrow via the PLUS loan is still limited by my actual income - I only have X dollars that can go to paying off any loan. </p>
<p>It doesn't matter as far as FAFSA is concerned, because they very wisely took home equity out of the equation - probably for reasons very similar to my logic. It probably is not good federal policy to force families out of their homes. </p>
<p>And your example -- an investor who would pay 10 cents on the dollar - just proves my point. At 10 cents on the dollar -- or even 30 cents on the dollar, I don't have an equity problem for financial aid. And what that investor is willing to pay is a lot more fair reflection of the real value of the house than the local real estate market. </p>
<p>But thanks for the idea. If you know of any such investors, I'd like to meet them and get a written offer from them. Then when I fill out the profile, I'll use whatever figure they give me to determine the market value of the home. ;)</p>