<p>Going through some of the NPC's for the colleges and they ask about home equity. A question on debt, but not to include consumer debt. </p>
<p>Is a HEL considered consumer debt? or do we consider it as debt on the home?</p>
<p>Also, how do we determine the "value" of our home. Someone suggested Zillow, but that was laughable. IF we could get their value, we would sell tomorrow. </p>
<p>The value of your home is what you could reasonably get if you sold it…today. You can use real estate comps to get an idea…from recent sales.</p>
<p>Home equity is used by some colleges in computing need based aid. There are varying amounts used from none, to all depending on the college.</p>
<p>I understand why colleges are asking for home equity. </p>
<p>Do we deduct our Home Equity Loan from the value of our house? </p>
<p>There is a lot of discussion on what home value is. Look up what the experts are saying and you decide which way to go. Also call a few college fin aid offices and ask them. You’ll find little consistency. IMO, get a quick sale value documented and use the net figure of what you would likely get if you had to sell in a few months time. I use the term “quick sale” loosely, not the term often used for specific purposes. The fact of the matter is that there is no one proposed method and many experts are saying most people over assesse this value. The way I look at it is that if challenged, you can then change the value, if it flies, then you are fine. IF the colleges wanted some consistent measure, it’s up to them to give that measure and everyone would then go by that process. They don’t. </p>
<p>HELOC is NOT considered consumer debt but debt that reduces the market value of your home. So if you have a house for which you could net $250K after all expenses pertaining to the sale have been taken into account, and for which you had no mortgage, if you borrowed $50K against it and paid your kids first year private school costs with it, then your house value the next year would be about $200K if the values did not change. It comes right off the value of the home, unlike a credit card bill or school loan which doesn’t reduce the value of any of your assets. For those schools that ask for car values, one can also do the same in reducing the value of the car by the loan amount outstanding against it, if it is a loan specifically securing the car,as a mortgage and HELOC does a house. </p>
<p>If you do borrow against a house, make sure the money isn’t sitting somewhere as an asset in some account of yours earmarked for your roof repair or whatever, because you aint’ allowed to earmark. Get caught, and you have to go through a lot of trouble requesting professional judgment and can be denied. You are supposed to list all asset values owned the day you fill out fin aid forms, and the exceptions are if they are specifically securing a debt as a home mortgage or HELOC or car loan does–if they are named collateral for a loan. The money is often better off in the home than sitting in an account, because a lot of school fin aid formulas will cap home values to a multiple of income, but not give any such break for other assets. </p>
<p>So outstanding amounts on a HELOC or mortgage, reduce the value of your home directly, dollar for dollar. So if you take out a loan , it’s consumer debt, if you take out a HELOC, it’s a reduction in home value.</p>
<p>Thanks, I thought it would be considered a deduction on equity, but wanted to make sure. </p>
<p>DD19 only applied to FAFSA only colleges, so I am not at all familiar w/ the common application. I would like to get a head start on that now, while I have time, then wait until DS is applying and not understand it. </p>
<p>Is there maybe a thread here that describes what information or documents we will need for this? Also, we have had to provide verification twice for DD19, so can this also happen w/ the common app? </p>
<p>What does the Common Application have to do with this? That is an admissions application, not a financial aid application.</p>
<p>I’m guessing you mean the Profile. </p>
<p>You need to also check each college…because some have their own forms…and your home equity is asked for on those too. </p>