<p>what exactly is home equity and how do you know how much you have? how much does it affect financial aid for private college? there is nothing about this in tax returns so does it mean it's 0?</p>
<p>Home equity is the value of your home, minus what you still own on the mortgage. What you owe is debt. What you’ve paid is equity.</p>
<p>Equity in your primary home is not considered for FAFSA (federal aid), but private schools may consider it when granting their own institutional aid. Some will look at home equity as an asset, just like money in the bank or investments. Others will consider it as a percentage of income, or not at all. They all have their own formula for valuation of home equity.</p>
<p>The idea is that percentage of the home’s value that you own (as opposed to the mortgage lender “owning”) is money you can borrow against, or money that you can access by selling the property at a later date. And it certainly is money you access by selling at a later date, but that’s a little abstract when it’s just the home you live in and you have no plans to move. ;)</p>
<p>Still, it is different from a family that rents, for example. They also pay for housing every month --paying rent instead of mortgage payments-- but at the end of the day, the rent money is just a straight-ahead expense with no long term benefit, unlike a mortgage which is a kind of investment.</p>
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<p>No. What usually shows up in taxes is the amount paid in interest on a home mortgage, as this amount can be used as an itemized deduction. But that has nothing to do with home equity. While many of the Profile and FAFSA questions come directly from tax returns, many things do not and home equity is one of them.</p>
<p>Home equity for pragmatic reasons is the amount you can get in terms of a credit line with a bank using your house as collateral. For financial aid purposes, a different figure, sometimes, much more generous, is used as part of your parents’ assets. It is what is considered the value of that home minus any mortgages, loans and liens on it using some standardized appraisel method. Zillow is sometimes used, getting estimates from local realtors can be a source, some other source, that I can’t remember is another way value is estimated. It can pay to get the lowest possible number of this value.</p>
<p>Home Equity is simply what your house is worth in today’s market minus what you owe on the house. Many banks will allow you to borrow 70 to 80% of your home’s equity value. The private schools like to know this in determing financial aid awards. The long and short of it, is if your mom and dad have to borrow money from their home to send you to a private school, pick another school preferrably in state for your undergraduate studies. Save the private school for graduate choices. You can do very well at “in state” public schools.</p>