<p>Does anyone know a link to information on how much home equity one needs to have before a school would want you to tap into it to pay for college?</p>
<p>For example, if the current market value of the home was $400,000 and you had say $320,000 in mortage, leaving 80K in equity--how would this be viewed in terms of assets and effect on EFC</p>
<p>Thanks</p>
<p>One additional question--what is the best way to determine current market value of your home? I was told to use the on line government formula and under that scenario our home is worth in the 380K range(you plug in your purchase price and year of purchase and it gives you a figure)---this figure seems pretty low to me even with the depressed real estate market. Most homes in my neighborhood range 550K up to 800K---our home is one of the smaller ones on the street, but 380K does seem low</p>
<p>I was also told that the market value of your home should reflect the price you would have to pay if you had to sell your home in a hurry--not over a leisurely 6 month period</p>
<p>Thoughts?</p>
<p>that figure was very low for our house too
According to our tax assessment- our house is 5 times the price that we paid for it 20 years ago
we just use our assessed value minus our loan</p>
<p>Depends on the school. If I remember correctly the FAFSA does not look at home equity while the PROFILE does. Also, some schools may have additional FA forms that may require home equity inclusion.</p>
<p>I agree with EK. Uses assessed value minus debt, unless home prices in your area are down dramatically since assessment.</p>
<p>Here's your answer: FAP (CSS Financial Aid Profile) schools assess home equity, but no more than 2.4 x AGI. The HIM (Housing Index Multiplier) assumes your home's value has increased by 5.25% per year (compounded). Therefore, take the cost of your home (price at closing) and depending on the age, apply the factor of 5.25. Example 100,000 price on a house purchased in 2000 = 129,155 value. Next subtract the amount of the mortgage(s), lets say 80,000 = 49,155 net equity (asset value). Add that to your other assets and determine if you're over or under the APA (asset protection Allowance).</p>
<p>Bumping this up a bit. </p>
<p>I have a very basic question and really hope someone can help. Just basically: What does ‘home equity’ mean and how would I go about calculating it? Sorry if it’s a bit dumb but I’m intl and just been checking out fin. forms and stuff.</p>
<p>If my parents bought a home for $300 000 10 yrs ago with a $250 000 mortgage. It’s now worth, say, $400 000 and we have $50 000 of mortgage to pay off by the time I apply for college. What would be our ‘home equity’ amount? And I’m assuming that the higher your home equity, the less generous your aid would be because colleges think you can remortgage the house to get a loan?</p>
<p>Hope someone can help. It would be MUCH appreciated!</p>
<p>equity = what you can sell it for - what you owe on it.</p>
<p>Different colleges use this number differently. Some cap equity as a percentage of income. Some may disregard it completely</p>
<p>FAFSA does NOT count home equity, only the schools that use Profile or some that may use their own form will even know this number</p>
<p>From finaid.org:
Net market value may be obtained by using real estate listings (from the local newspaper or multiple listing service or property tax assessment site) to get a ballpark figure for similar size properties in the same location. There are also web sites like HomeRadar, Zillow and Domania that provide ballpark estimates. Another method involves using the Federal Housing Index Calculator to calculate the minimum derived value for the property based on its original purchase price. This yields a conservative lower bound on the value of the property. </p>
<p>If the property is deeded separately (e.g., townhouses or condominiums), it should be easier to assign a separate value to the parts of the property occupied by the owner. </p>
<p>Given today’s market conditions, I would use the FHI as a starting point because you will not get anywhere near market value if you’re trying for a quick sale…and Profile is asking the value you could get for a sale TODAY, which obviously would yield a price discounted well below comparable homes where the seller is not forced to sell. The instructions specifically say not to use assessed, insured, or tax value. Also, don’t forget to deduct selling expenses (commisssions, closing costs, repairs, etc) from the value of your home. I believe the reason they ask for the year and purchase price of the home is so that they can check the FHI as a minimum value indicator.</p>