According to a 1999 report by the U.S. Census Bureau the annual average income for a person who graduated from high school was $24,572, while the average income for those with a bachelor's degree was $45,678. The earnings gap between a high school diploma and a bachelor's degree or higher can exceed $1 million over a lifetime.
For most people, the cost of tuition can be a major hurdle for a college education. In October of 2005 the College Board, a non-profit association of 4,500 schools, colleges and universities released the report "Trends in College Pricing 2005." According to that report, the cost of attending a private college is $29,026 per year on average, and $12,127 at four-year public universities.
There are a number of grants, loans and other forms of financial aid available but your home equity may be a hidden source of tuition funds for your or your children. The equity you have in your real estate is the difference between what you owe and what the property is worth. A home equity loan allows you to borrow money based on that amount.
The amount of your home’s equity isn’t based on what you bought the house for but what the house is currently worth. For example, if you purchased your home for $150,000 and you have an existing mortgage for $120,000 that gives you $30,000 in equity.
But let’s say home prices in your area increased and an appraiser values your home at $200,000. That means you now have $80,000 in equity. The formula used for this is easy, take the new value ($200,000) minus debt ($120,000) for $80,000 in home equity.
The amount you can borrow against that equity varies from one lending institution to the next and is determined by your credit score and the type of loan you take out. Common home equity loans are second mortgages, refinance home equity loans, 125 home equity loans, and home equity lines of credit (HELOC).
When you shop around for your home equity loan be sure to count all the costs before you decide on a lender. The APR doesn’t include costs such as closing costs and other fees such as attorney fees, filing fees, title search, taxes and insurance.
Some lenders also charge points. One point is equal to 1% of the amount of the credit line and the points are paid when you close on the loan. They aren’t added into the interest rate.
Before you sign on the dotted line, do your research and always beware, your home is collateral for the loan. If you default on the payments you could lose your house.
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