My grandparents are in the process of refinancing their home (but are not taking any money out of the house), and are planning to add me to both the mortgage and title of the property. This is not really a gift, as I will be taking care of them when I graduate. Nonetheless, there is a substantial amount of equity in the home. How will this impact me on the FAFSA? Is this something that I even have to include? I won’t graduate for two years, but they want to get this out of the way now to take advantage of the extremely low (3.5%) fixed rates.
Your share of the equity will be an asset as this is not your primary residence. Please think very carefully about this if it will make the difference between you getting something like a Pell Grant…or not.
Why are they listing you on the mortgage? Are you a student? If so, what income qualifies you as a cosigner on a mortgage?
My grandparents home is my primary residence. That’s where I grew up; they were essentially my parents. They are adding me to the mortgage, because I will be taking over the payments in 2018 (when I graduate). Given that my grandparents ensured that I had a good childhood and put me first always, I want to ensure that they have a good retirement and are taken care of.
If it’s your primary residence, I don’t think it will be counted on the FAFSA.
But I’m not positive…because this is a student property, not a parent one.
If your college uses the CSS Profile, the equity in your home might affect your need based aid.
Do your parents live in this home also?
Your grandparents can’t just add you to the mortgage. Being on the mortgage means that you can be held responsible for making the payments. Only the mortgage holder (bank, credit union, whatever) gets to decide who is on the mortgage, and should only approve those who have the demonstrated financial capacity to make the monthly payments, plus pay the real estate taxes and property insurance. Do you currently have the resources to be able to do that? Do you have a history of being able to meet financial obligations such as this?
Of course, none of the above stopped a lot of unqualified people from getting mortgages before the housing bubble burst, but that’s a whole 'nother story.
We have already been approved. But if this will impact my FAFSA, I am not sure what to do. It would be a joint ownership with all of our names on the title and mortgage.
If it’s your primary residence, it shouldn’t impact your FAFSA. If you also need to file CSS/Profile, that’s a different matter and depends on the school.
I don’t even know what the CSS profile is, I’ve never had to do that. Just the FAFSA.
Another question - will putting the house in my name also require me to list that as gifts for 2016 on the FAFSA.
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add me to both the mortgage and title of the property.
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WHY are they adding YOU to the mortgage?? I wouldn’t agree to THAT.
As for adding you to the Title, have them do that LATER after you file your LAST FAFSA.
I will be taking over this house when I graduate; rates now are at all-time lows (they are getting a 3.5% fixed). That is why I am going on the mortgage, because I will be responsible for the payments beginning in 2018. They will be retiring December 2018. For now, they can afford this house no problem, especially now that they are doing a new 30 year loan.
Regardless, it looks like your primary residence is excluded from the FAFSA and does not hurt EFC. Of course that makes sense, because most people can’t afford to take out equity and begin paying on a home equity loan. And, it’s not like I will have access to the equity, being that I will be a joint owner with right of survivorship.
You can take on any financial obligation you wish at any time and for any reason. I could have the woman who cuts my hair pay my mortgage if she’d agree- she doesn’t need to be on the title to do that.
Your grandparents can get that new mortgage now. They don’t need to put YOU on the mortgage NOW. They can get the new rate, and the new mortgage without having your name in the mix.
They can deal,with adding you or whatever at any time later.
It’s not like your income or ability to pay is going to lower their mortgage rate. It’s not.
If they want to refinance…then fine. But you don’t need to be on the mortgage now.
And you need to understand something. if you are on that mortgage and IF the grandparents have some financial issues…YOU will be fully responsible for making the payments as one on the mortgage. I know you say they are fine now…but stuff happens…and in six months they might now be.
I think this is risky business for no real reason now.
You must refinance to add someone’s name to the mortgage.
So…in a couple of years…when you actually have income…and can be an authorized mortgage holder…fine…refinance.
I can’t imagine how a bank would include someone in college, with no income as the co-owner of a mortgage.
As an FYI…no one thought the mortgage rates would be this low again a few years ago when they hit this level.
I hope @BelknapPoint or @Madison85 can answer the question about whether this would be a gift. You say there is significant equity in this house. Seems to me that you will have been gifted half of that equity…but I’m not a tax expert.
I think you need to be careful. It sounds like the grandparents have this plan that YOU’RE going to be making all payments once you graduate/work because they’re going to retire AND LIVE IN THE HOUSE until they die while YOU pay the mortgage?
Is that true? So they will pay nothing while living in the house? What about when you get married? Your new spouse is going to have to accept that 2 people are living in the house, rent free, while you both pay all the bills?
WHAT if you don’t get a job near THAT home??? What if your job is in a city 75+ miles away? What if you get a job nearby, but then it transfers you to another area??
Who will pay for repairs? upgrades? appliance replacement? AC/ heat replacement? utilities bills?
Do your grandparents have other children or grandchildren that can “claim” an inheritance of “their part” of the home ownership when the grandparents die? What about your parent? Will that parent claim to inherit his/her parents’ share when they die?
You could end up in a bad situation if after you’ve been making payments, your grandparents die, and suddenly their other heirs demand THEIR SHARE of that house that YOU’VE been paying for.
I have a small income and I have excellent credit - no problem there. I’m a year ahead on my car payment, and I have no credit card debt - despite having a $20,000 combined credit limit. Mortgage rates in 3 years could be back to 5% or higher. It is now 3.5%, and that is a lot of savings (approx. $200/m more at a 5% rate). Just in December, rates were above 4% for a 30-year fixed. These rates can’t hold forever and I wouldn’t want to risk that.
There is $150,000 equity in the home. If something happens, the house can be sold, or my aunt and uncle will surely help my grandparents (they do very well). They just offered them $100,000 two weeks ago to pay down the mortgage, but my grandparents declined that offer.
Edit: my father has been completely cut out of the will, a long time ago. They are concerned about that too and will be making the appropriate changes to the will. The only ones included in the will are me, my brother, and my aunt.
Edit 2: they live near D.C. There are a lot of jobs there…
But, more importantly, my grandparents raised me after my parents abandoned me. I owe them and I want them to have a good retirement. As soon as my aunt graduated, they ended up with three more kids to care for and spent 18 years caring for us. I am now 20. That changed their financial plans completely.
@mom2collegekids My grandparents will be paying half of the mortgage, as well as utilities. I don’t mind living with them. If it wasn’t for my grandparents, I don’t know where I’d be in life. My parents abandoned me. I owe my grandparents a happy and stable retirement. And, I want them to be able to live in the house that they had built for them. It would be sad to see them leave it.
My grandparents are having the roof replaced this year, as well as the HVAC system, tankless hot water heater, windows, and possibly the siding. The interior was renovated in 2006 as was the pool. The items listed above are really the only remaining things.
Then WHEN YOU GRADUATE you can have your name added to the mortgage.
DO it before and you can kill your chances of getting financial aid from many colleges that use the more “invasive” Profile financial aid application form.
The Profile DOES take into acct any PROPERTY that is owned by you. Colleges can use home equity as a reason to reduce the FA they offer since they reason you can pull $$ out of a house to help pay for college.
Another thing… my grandparents have done so much to this house, and spent hundreds of thousands in upgrades. I grew up here, as did my aunt. They’ve lived there for 30 years. I just want them to be able to retire there. It was built for them, customized for them, and it is the ideal place to retire… pool, luxury kitchen, luxury bathrooms, amazing landscaping. It’s a beautiful home, and I know that if they were to sell and downsize, they wouldn’t get anywhere near what they’ve put into the house. For examples, pools add no value, but they spent $125,000 on that pool!
@menloparkmom My university does not use the CSS Profile, as far as I know. I’ve never had to do anything with that. Just the FAFSA. I would know if they did, correct?
Do you currently get a Pell Grant as part of your financial aid? What other need based aid do you get?
I applaud you for wanting to help your grandparents who have helped you. But you are a 20 year old college student…with insufficient income to be a mortgage holder. Not sure how,the bank is allowing this.