Reply to ok, don't crucify me.. question about financial aid.

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[quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous]OP here.  
[b]The home equity thing is frustrating.  [/b]

Obviously, it's part of our financial picture and at some point in our lives it may turn into cash (not a guarantee but it MAY).   So I get that it's considered an asset.

But it's not a secure asset.  It's not cash now.  It MAY turn into cash some day.

And would anyone in their right mind actually USE home equity (and pay interest on it) to pay for private school?  Baring some sort of real extenuating circumstance (kid is floundering and NEEDS to attend private in which case I understand it), it seems like an incredibly foolish thing to do.

[/quote]

Gee - if I had 700 k in home equity I would not be frustrated.[/quote]

OP is right, though. It's not cash right now. It's potential future cash, just like if you have a stock that is at an all-time high. Would you take a loan against your stock, knowing that if the stock fell you'd have to give up some other asset (like, say, your house) to pay it back?

We have equity in our house, but that's only because we've lived there for many years. We spent four years owing twice as much on the mortgage as it was "worth." Our neighbors--upper middle income household with HHI of $150K--were foreclosed on during that period because they had taken a second mortgage at the tail end of the last boom. There is no way I'd ever tap home equity to pay for anything other than direct reinvestment into the home.

Now, if you want to sell your home and realize that equity--sure. But most private schools (and colleges) have no expectation that you will sell your home in order to pay when they assess your need for aid, even if there are people who choose to do so. (Schools might, and some do, decide to grant some predetermined allowance for cost of living in an area, and then decide you don't qualify for aid if the reason you can't afford it is that your mortgage payment is double that allowance because you live in a pricey neighborhood. Then you always have the option of selling and downsizing, and in OP's situation with three kids coming up on high school, that might make sense to do. But the problem with having lots of equity due to appreciation is usually that anywhere else you might move to has also gone way up in cost.)[/quote]

The sensible thing to do is downsize, not to move to someplace equally expensive. When you have an amount of equity in your house  that makes sense in the context of your income and area cost-of-living, then it won't affect financial aid.   But when you're just sitting on top of a huge pile of cash like OP, yeah,  you bloody well should  downsize if  you want FA.  [/quote]

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