Combined gross income for my husband and I is around $170K. We still have a significant mortgage debt on our home, but property values have soared in our neighborhood. If we take out a home equity line, they will give us a report saying that our home is worth almost double what we paid for it. Does that report impact the value that we need to report on the financial aid applications? Will the schools check on the value that we submit on the financial aid applications?
Just be honest about your actual home equity. Then you won’t need to worry about anyone checking.
Current fair market value minus debt that is secured by the property.
Thanks for the reply! So then should I assume that taking out a home equity line, which means that they will pull a report on the value, won’t have an impact one way or another?
Who is “they”?
“They” is the bank where we will be taking out the home equity line.
If you use any of the line of credit, obviously it will decrease your equity in your home.
Also, we were told to value our home (it’s self-reported) as if we had to sell it quickly, like within 30 days. No staging, no fixing items of deferred maintenance. Price it to sell fast. So that lops some value off the price.
Thanks! That’s helpful info!
If your house has doubled in value, you need to consider its current resale value when computing home equity.
It really sounds like you don’t want to consider the appreciated value, which is not an honest thing to do
I don’t think she’s said that, thumper. I think she just wants to know how to calculate her home equity.
@parent8762 you’re asking a valid question. Personally, I wouldn’t want to be in the position of telling the bank that my house is worth X, then shortly after telling someone else that it’s worth less than X. So yes, taking out a HELOC probably does create a sticky price point for you. Whether as a practical matter a school will ever have access to your loan docs probably isn’t even relevant. You’re signing both the loan docs and FA docs certifying they are accurate. Why not wait on the loan until after you file the FA docs? Then you can use your best, honest judgment of your home’s true value (which is unlikely to match the bank’s valuation).
Personally, I would want some kind of “good faith” documentation of whatever I put down on my financial aid documents. We inherited a (part) of a family home upon a death, and 8 years later it was sold. For reasons lost to history, we did not have an appraisal for the time we “acquired” our share. We used a Zillow historical estimate for doing our taxes (we lost paper money) on the house. So at least if we are questioned, we have something that shows we didn’t just make stuff up.
Do you have access to the assessed value of your home? Our county auditor has that information for every house (because it’s used to determine property taxes). We used that number for all FA forms.
You can estimate the value based on what it would sell for tomorrow, as is. Not the high price your neighbors got after spiffing up or what you would ideally hope to list for, after some work of your own. You know that, if your kitchen isn’t updated, your rooms haven’t been repainted or your carpet is old, etc, these are real factors that affect sales price, right now.
I wouldn’t use a loan appraisal, that’s somewhat theoretical, based on comparable homes. No one is looking inside.
What worked for us was using the FHA tables that estimate increase in value from original sales price. This works better if you held the home a long time. Zillow and like sites have us at a high value. But again, that’s based on other nearby homes’ sales histories and some calculations. I felt that, if questioned, I would point to the FHA and the to-do list.
Following up on @My3Kiddos in Post #12: if you live in PA you have to multiply the assessed value by the Common Level Ratio for your county (changes annually) to get an approximate fair market value. I don’t know if other states do this.
Just be honest. Really, if your house has doubled in value…then you can’t use your original purchase price as the current value. Please just consider that point.
As noted, the price you use, is one that you could get by selling your house now…rather quickly without any fancy updates or the like.
But you can’t ingore appreciation that has taken place since you bought the house because really that does affect the actual value of your house now.