Pay off mortgage?

dt123
Sat, 24 Jan 2009 00:35:06 +0000

Home equity is considered an asset just like cash for Profile. So shifting from savings to home equity (by paying down the mortgage) is no advantage, generally speaking. Some A-list privates cap home equity, so there might be some marginal advantage at a select number of those schools. You just have to research it to know which ones.

Home equity is off the radar for FAFSA. FAFSA is going to be relevant to you if you think you will be in Pell Grant territory, or need lots of government loans. Your EFC has to be pretty low to get a Pell Grant, and even then it is not that much.

One thing about a mortgage that you have had a while is that, through the magic of amortization, you have already prepaid most of the interest, and all you have left to pay is principal, so you might as well take advantage of the remainder of the term. If you pay it off after you are well into it, the effective interest rate over the life of the loan is much higher. The banks are counting on people to get tired of payments and pay off early, to stick it to the borrowers one last time.