ANSWERS: 8
  • I would suggest that you keep that very valuable mortgage deduction going, and put some money aside to accrue interest.
  • I would say divide it. You should start a college/educational fund in the bank As Soon As Possible. You definitely want one of those. I'd say put 2/3 into college and the rest towards your house (of what you wanted to put in your house. However, if you choose the other way, beware that some mortgages have a 'quick payment' fee, which means that if you pay too quickly (more money than you owe each month) they'll fine you. Yeah, it's crazy, but it's life.
  • I'd save for college. The money you put into your house is being stored there as equity and won't really do you any good there. On the other hand, if you save for college by investing it somewhere like a mutual fund, or some other low risk investment plan, it will gain in value. In my opinion, keeping those assets fluid will give you much more earning power.
  • You need to look at several things. Yes: the tax deduction on the interest on your mortgage. Yes: In our State there is a tax break (state) for funds set aside for college. Yes: The rate of interest you are paying on you mortgage. Yes: The rate of interest on a college fund account. Cost all this out. It may be best to actually pay off the mortage. (I would do that dispite the tax break). The last several years of our mortgage payments didn't result in enough interest to give us a tax break.
  • Tell them to go to community college if you can't afford it, or get a student loan.
  • I would say save for college in a 529 plan. Having equity in your house can reduce the amount of assistance you get when they start college. A 529 plan is interestingly not an asset of the child nor for estate purposes an asset of yours.
  • I think it's an excellent idea. Paying your house should be priority. You have to pay it. You don't have to help your kids with college, although it's fine if you do.
  • Many schools with limited funds for financial aid depend on available federal funds. The federal formula does not include home equity as an asset, and the form you fill out to qualify does not even ask for information about family homes. It would make little sense to pay off a home mortgage to move family savings out of the analysis of your financial need. If you use your savings to pay off a home mortgage, then you no longer have that money available for emergency expenses, which then may need to be covered with another loan. Schools that use their own funds for aid usually ask a family to file a College Board form, which does want information about home ownership. Schools use this information differently. Some include existing home equity (current market value of home less remaining mortgage debt) to analyze your available assets, while others cap home equity at a percentage, often 1.2 percent or 2 percent of income to address the issue of home value inflation.

Copyright 2023, Wired Ivy, LLC

Answerbag | Terms of Service | Privacy Policy