Saving For College: Selling or Refinancing Your Family's House

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Many of you probably never thought about using your house as a piggy bank for your children's college tuition, but your house may be not only a place to lay your head at night but also a valuable asset to consider when saving for college tuition. Your house is similar to a college savings plan in the following ways:

• You put money into it each month.
• The money you put into it appreciates in value.
• You can cash in that value for your child's college education.

When you spend money at the grocery store or on clothes, what you purchase has a value that is quickly consumed. On the other hand, money that you spend on your house often creates value that you keep, the same as money that you put into a bank or college savings account. The following sections explain how the value contained in your house can increase, making your house an asset for your college savings.

Recognizing Your House As An Asset

If you're thinking of making your family house a player in the game of educational funding and saving, you first need to look at your house from the correct perspective so that you see it as an asset.

Distinguishing House From Home

Your first step to gaining the correct perspective of your house is to recognize what is your house and what is your home. You own a house, not a home. The presence of four walls and a roof does not, by definition, create a home — you do. Your efforts turn a building into the warm and inviting nest that you use to shelter your family, especially your children. But your money turns that building into a house that you can cash in for a college education. So when you walk through the door, make sure that you can distinguish your home, a place full of memories, from your house, which you may choose to use as an alternative to other forms of college savings plans.

Discover the economics of house ownership. Whatever memories your home may hold, your house — those walls, floors, and ceilings — have specific monetary value. Your house is an asset that you own, which, over time, should appreciate significantly in value. Maintaining that value helps you to maintain an asset that may be cashed in, just like any other type of college savings plan.

Getting Rid Of Housing Debt

The easiest way to rid yourself of housing debt is by changing your perspective. Don't focus on the amount you owe on your mortgage loan (the amount of money you've borrowed against the value of your house). Instead, concentrate on the net equity in your house (the current market value less the balance remaining on your mortgage loan).

For example, if you have a $100,000 balance remaining on the mortgage loan you borrowed in order to buy your house, but your house is actually worth $250,000, you may choose to focus on your debt ($100,000) or on the amount of net equity you have ($150,000). That net equity represents more than enough savings to put at least one child through four years of college — don't ignore it.

Adding To Your Monthly Savings

Whether or not you're able to adequately fund your specific college savings plans, if you own your own house and have one or more mortgages on it, you are adding an amount to your overall, nonspecific savings each and every month. While the payment plan for your mortgage loans may seem endless (and they often are), each monthly payment includes a small amount of principal, or a piece of the original face amount of the loan. The payment of this piece each month decreases the amount left owing on the loan, therefore increasing the net equity of your house. Remember, you now owe less; therefore, your equity is greater.