Q. Our son has just started his senior year in high school, but we have already received the various forms to fill out so we can try to get some financial aid to send him to college. Our home is worth about $150,000 more than what we paid for it several years ago. Will this affect our familyAEs ability to get the most financial aid possible?
A. It depends largely on which college or university your son hopes to attend.
While some schools donAEt expect parents to use their home equity to help pay for tuition and additional college costs, other institutions indeed will reduce the amount of financial aid theyAEll offer if the family home is worth much more than Mom and Dad paid for it. Unfortunately, thereAEs no list available that shows which colleges consider home equity when calculating their financial-aid packages and which schools do not. But the majority of public schools, including most state universities, do not consider the parentsAE equity when making financial-aid offers.
ItAEs a different story at hundreds of private schools and a handful of top-flight public universities across the U.S. These institutions not only ask for details about the parentsAE home equity, but often expect the folks to tap some of it to help pay college bills.
The admissions or financial-aid offices at the colleges your son is considering can tell you whether the equity in your home will be included as part of their financial-aid offer.
If the school will indeed consider your equity when doling out financial help, make sure to ask about any exceptions or exemptions that can help to obtain the best aid package possible. For example, some schools will overlook a large amount of built-up equity if one or more of the studentAEs parents suffers a long-term disability, is retired or has lost a job and canAEt find a new one.
It might even be a wise idea to tap your home equity and use the proceeds to make large contributions to a tax-advantaged retirement account before you fill out the financial-aid applications for your son. Though many schools now expect parents to use part of their home equity to pay for tuition, most of them donAEt expect you to raid your own retirement nest egg to meet the rising cost of going to college.
One of my favorite Internet sites for information about financial aid for college is finaid.com, a free site that answers dozens of typical questions concerning different types of help and provides several online calculators to estimate costs and a familyAEs expected contributions to their offspringAEs higher education.
Q. We purchased a home two years ago and financed it through a bank that I wonAEt name, but letAEs just say it was a "country wide" lender. Now it has been purchased by a different lender that has banks, um, all across America. Can the new bank alter the interest rate on the fixed-rate mortgage that our first lender gave us?
A. Gee, your carefully worded question leaves me wondering which two banks that youAEre writing about. Not!
Nonetheless, the financial institution that recently purchased the lender who issued your original mortgage two years ago cannot change the terms of your current home loan, provided that you are up-to-date on your payments. Federal law permits the new bank to change the mailing address of your future payments, but it would be illegal for it to alter the interest rate on your mortgage or make any other substantial changes to its terms.
* Write David Myers at
P.O. Box 2960, Culver City, CA 90231-2960.
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