<p>My husband and I have a modest income. However, we earned a lot more in pre-recession times and paid off our home. We consequently have a lot of home equity available to us.</p>
<p>While we plan to help out with college costs, our EFC comes to 40% of our present income! If we were to take a mortgage for half of the home's value, our EFC goes down to 20% of current income. </p>
<p>Having a lot of home equity and no mortgage clearly hurts us. But we are 10 years away from retirement and don't want to incur major, new debt now. Suggestions or strategies? Or, do we take out a home equity loan for 3 months, file our taxes and immediately repay it? (And do this again, for the next four years?!) Thanks for any suggestions!</p>
<p>If you took a home equity loan, the proceeds of the loan would then be a big lump of cash you have to report on the Profile. You might come out worse.</p>
<p>right, unless you needed to take out that money anyway to do improovements or repairs why not just count your blessing that you have your house paid off!
That is quite an accomplishment!
BTW the EFC takes into account not only income but donations from savings as well, they don't expect you to take all money from income, but do expect you to have saved something for your childs college. I think the basic EFC generally does come out to be 1/3 to 1/4 of income, also depends on how many dependents you have as well as how far from retirement.</p>
<p>I am pretty sure that some schools don't count home equity against you.
Someone out there knows and maybe can give a list of schools where this is the case.
I think you are right not to want to go into debt so close to retirement.</p>
<p>Schools which require just the FAFSA will not take your home equity into account. These would mostly be state schools, however. The FAFSA and the Profile both take into account the age of the older parent so as to protect your assets for retirement. Both have an asset protection allowance as well. Check out <a href="http://www.finaid.org%5B/url%5D">www.finaid.org</a> for more info. Also, I googled "income protection allowance" recently and came up with lots of interesting information. My husband is about 8 years from retirement and we have two more to put through college, so we are looking at the same issues you are. Good luck!</p>
<p>I think it is both fare and just that schools consider home equity. For many folks it is by far their largest form of savings, it is liquid (in that mortgages can be written against it), and it has appreciating value. I know one family in California that remortgaged the house four times to pay off the college tuition of each of the kids, and came out ahead each time based on price appreciation.</p>
<p>Thank your lucky stars that you HAVE a house.</p>
<p>That said - if you take out the mortgage now, won't your other "assets" increase by exactly the same amount as the mortgage, leaving your EFC exactly the same?</p>
<p>The reality is that if you take out a home equity loan, you will have payments on THAT. I wish we didn't have a mortgage payment. It would more that 1/2 pay for DS's tuition/r/b and fees at school. We are paying BOTH our mortgage AND the costs of college. I think you should consider yourself very fortunate that you only will have one of these expenses to face each month. BTW, our EFC is about 30% of our income...and we still have the mortgage.</p>
<p>
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Schools which require just the FAFSA will not take your home equity into account. These would mostly be state schools, however
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true
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For many folks it is by far their largest form of savings, it is liquid (in that mortgages can be written against it), and it has appreciating value.
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true
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if you take out the mortgage now, won't your other "assets" increase by exactly the same amount as the mortgage, leaving your EFC exactly the same?
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interesting
go to finaid.org to see if that works</p>