If you are considering selling and buying locally (which it does not sound like you are), you need to know that many but not all Division 3 schools take home equity in your primary residence into account as well. When they do it is usually capped at 2.4X income but run the NPC both ways at schools your kid is looking at. If they ask in the NPC then they probably do take it into account.
@youngbeck we filled out the fafsa and profile and we also called the school to let them know about our one time special circumstance. We sent in a letter and 5 documents confirming what we were telling them. We were assigned a FA counselor and I called her to let her know that we sent in the papers, a letter, plus I mentioned that we explained things on the CSS Profile on that “special circumstances” section at the very end. She said something like “oh we do not read that,” meaning they do not read the section of the profile where people can explain special circumstances.
I guess the FAFSA calculation assumes that the homeowner’s home that s/he is living in should be protected, so that the home isn’t threatened. When the only home isn’t being lived in, then it’s not sacred.
@twoinanddone Thanks for those words on D3/LACs since my son does feel a bit discouraged. I’m curious what you mean when you say schools can do what they want with their money? Is the suggestion that well-endowed LACshave a fair amount of wiggle room to up financial aid if they want a student? I was pretty much planning to write off the high-end schools that don’t have merit because they can’t offer athletes $$ and because on the NPCs I’ve checked, the value of this house seems to leave us with a sky-high EFC.
@mom2collegekids I think it’s a good thing FAFSA doesn’t expect people to sell their homes to pay for college, since it’s the one solid asset many people have. Unfortunately, it’s also the one asset my family has, we just don’t happen to live in it at the moment!
When my D was a high school sophomore, my husband purchased a townhouse in another state for his aging dad. Although all 3 siblings were part of the decision & the finances, the deed was put in our name because we have stellar credit 
and could get a low rate. The dad pays us rent.
When it came time to apply for financial aid, this absolutely had an impact on whether we qualified.
The value of your house should be the equity. And even with that…it’s your income that droves the family contribution far more than your assets. This house would need to be worth $800,000 to add $44,800 to your FAFSA EFC.
Those Profile schools could assume you will take a home equity loan on that property. Or refinance.
You aren’t going to get need based aid so you can own a home you don’t live in.
Schools can set their own requirements for their own institutional aid. Williams can decide a family making $100k with a second home can pay $10k or $20k or be full pay or free ride. Amherst can make an entirely different decision for the same family and same facts. Athletics can give a student a hook or slot, a way into the school, but once admitted that student is to be treated the same all all other applicants for financial aid. Do some schools give the athletes more? I’m sure they do, but they aren’t supposed to.
I think being an athlete helps in that he (you) can get an early read before the ED deadline. You’d have a chance to discuss your situation with the financial aid office. That discussion may lead to nothing, but at least you’d know. You also have the opportunity to look at other schools with merit or athletic scholarships. There are small D1 schools (Presbyterian has only 1200 students), elite D1 schools (Northwestern, Duke, Vandy, USC) . Some of those might work better for you, or the D3 schools with merit.
It’s worth a shot to ask, especially as you are looking early. If several schools say no, then you know to move on.
And don’t forget all the rent. That would also add to the EFC, probably more on the Profile schools than on the FAFSA, but in a high-rent area, it could be significant.
One option, which may not help you but assuming you do not want to sell the first house, is to pull all the equity out of it so that it is worth 0 (even an $800,000 house if it has $800,000 in loans is worth 0 for financial aid purposes (or as close to that as you can get). Then use the money to buy a house by paying cash in your new area. Preferably something on a desireable street that is highly saleable. You live in the new house so the equity will be treated as home equity. The tenant in your old house will be paying part of your mortgage and you can make up the rest by using what you would have paid in rent. Also, the interest (but not the repayment of prinicipal - I think?) will be deductible against the income you get from the tenant and you probably already depreciate the house (although some schools may add that back in). Obviously you need to run the numbers and verify the financial and tax consequences and it is probably worth meeting with a financial consultant or accountant to go over your options.
Really? There would be tax implications. This is a rental property, and as such, would be subject to capital gains…unlike if it were the primary residence. The income from the rental,will still be counted as income.
Plus the housing market is a fickle one. I would never buy a house hoping I would be able to sell it for even the cost of purchase. Too many times in my life when I’ve seen the real estate market tank.
I agree that OP would be taking a risk on the housing market, especially if OP needed to move away. Which is why I said to pick the best location possible to make it easier to sell but yes those who lived through 1987-1994 and 2007-2010, know there is a risk and the risk may not be worth it. Plus if she loses the tenant or the income is not enough to pay the mortgage that is also a problem and may not be worth the risk, only OP and her financial adviser can determine this.
This AVOIDS capital gains on the rental property. I am not suggesting she sell the rental, rather pull the equity out so that it has very little value as an asset. If OP has a few years (remember it is now prior prior year for income) then she can find some other way to allocate what she pulls out and not buy a family home in her new location if she does not want that, such as additional retirement contributions (but only if she has more than 3 years to plan). The interest costs may offset the income or some of it. The income she has regardless unless she sells and THEN she would have a capital gain.
It may not make sense when she and her financail adviser look at it or it may not appeal to her, only OP knows her situation and if this is worth looking into. It is worth getting professional help if this course is at all appealing.
What bank allows you to refinance and pull out all equity on a rental?
It makes no sense.
Banks who think they can make money!
It is called a cash out refinancing. it probably would never be 0 which is why I said “or as close to that as you can get”.
the rate will be higher on a rental and the bank will want to see that the income can pay the mortgage and taxes.
Sure in metro Detroit this will not work but in suburban Orange County (no idea where OP lives) she should be able to take out some or most of the home equity.
It may not make sense for OP, only she and her financial adviser can determine if this works for her overall financial picture including FA, taxes, expenses, investments, her credit and where they ultimately want to live and the housing market in both areas.
It doesn’t avoid capital gains. If it did, everyone who was about to realize a capital gain would just mortgage the property just before selling and avoid those gains.
@twoinanddone I was talking about if OP wanted to keep the first house which she rents out which OP seemed to want
then just pulling out as much of the equity as possible through refinancing. Refinancing does not change your capital gains or your basis (except by the very mini amount of certain refinancing costs that cannot be deducted until you sell}.
@Madison85 @thumper1 I did not realize you thought I was talking about the rental OP currently lives in. I was talking about keeping but mortgaging the house OP owns in the other state. Will work on clarity in the future.
I knew you were talking about the house they own.
I seriously doubt that any lending institution is going to give a full equity loan to a family for a rental oroperty. Just isn’t going to happen.
Maybe not full equity but 80%. It would then be up to the OP to determine if that helps her at all. Easy enough to get a preliminary estimate of loan amounts.
Thanks for the suggestion, @SeekingPam – it does seem like a lot of risk to carry 2 mortgages when we have a relatively inconsistent income. And having lived through the last downturn, I know how quickly the bubble can burst, but it’s definitely worth asking the accountant.
I believe SeekingPam is suggesting that you purchase something outright as your primary residence…not carry a mortgage on that property.
If the school is a FAFSA only college…the primary residence equity is not considered.