<p>A naive question for those of you who have been through it already...</p>
<p>We're having remodeling done to our house & have taken out a sizable home equity loan. I'm wondering if we'd be better off cashing in some stock to pay off that loan, to reduce our assets when being assessed for financial aid.</p>
<p>For the question on home equity under the assets section of the FAFSA (i.e., "the value of the house minus what is owed on it") does one subtract the home equity loan as well as the remaining mortgage from the house value?</p>
<p>You do not show your primary home at all on FAFSA. If you own second homes then those are shown less whatever debt is against them. (this is just for FAFSA - CSS treats everything differently).</p>
<p>You might be better off cashing stocks as they show as an asset while the house does not. But beware of how much you increase your income by cashing stocks as the sale will increase your AGI on tax return.</p>
<p>Also if your income is less than 50,000 there is a simplified needs test where none of your assets are counted - but you have to be eligible to file a 1040a or 1040ez which you will not be if you sell staock.</p>
<p>CHi- as long as paying down the loan will not leave you illiquid- I guess if the HELOC stays available you are fine and it would be smarter to pay down the loan, though you probably have $40-$50k in asset protection too!</p>
<p>You should do what's best for you and not try to manipulate finances for FAFSA. We have both a mortgage and a HELOC and I add the two together when I answer the question about how much we owe on our house. I sold some stock to pay off debt, but it was because I didn't like the market, not because I thought it would help us in an aid calculation.</p>
<p>The market is horrible right now--if you have to take a beating on the stock it doesn't make sense to sell it unless you want to for other reasons.</p>
<p>Right, good point. The FAFSA is far enough in the future that I'm not doing anything yet - just trying to educate myself on the process and the factors involved in evaluating families for aid.</p>
<p>Look at the actual formula and see if it makes sense to move assets, if your assets are already below the protected amount, no need; if they are assessed at 6% and you need 50% of them to pay your EFC, then also no sense moving them- saving 6% but being stretched to find that EFC- though we do use our HELOC to fund timing shortfalls.</p>