How to Use Your Home to Finance Higher Education

If you are looking to finance higher education you may think that student loans are your only option. If you are doing this for your child, then there is a good chance that you are old enough to have been paying for a mortgage over several years. Instead of signing your child up for a student loan, consider using your house to finance their higher education costs. There are a number of ways that you can accomplish this task. Here are a few ways to get the job done.

Home Equity Loan

A home equity loan is a loan that you take out on the equity that you have accumulated on your house. With this type of loan, you have a certain repayment period that you are required to repay the loan within. This will allow you to finance your school costs without picking up a separate loan. You can get a fixed home equity loan and a longer term, and have a low, fixed payment over the life of the loan. This will allow you to budget a certain amount of money each month to education costs and pay them off within a reasonable amount of time. 

There are a few advantages with this type of loan. You can deduct the amount of interest off your taxes. While you can do this with student loans, you won't get the immediate deduction. With a home equity loan, you will start making payments right away, which means an immediate deduction for this year. With student loans, you will not start repaying them until you are done with school, which delays the tax deduction and the repayment of your loans.

HELOC

A home equity line of credit is another way that you can utilize your home to finance higher education. This is very similar to a home equity loan, with a few different aspects. When you take out a home equity line of credit you do not borrow a certain amount of money upfront. You just have an account that is an open line of credit up to a certain point. You can then pay the bills as they come out of your line of credit. You will write checks out of this account just like a checking account. Then you repay the amount you have borrowed at your discretion. It allows a flexible repayment period that is still tax deductible. 

Refinance

Another way that you can use your house to finance higher education is through a complete refinance of your existing mortgage. This will also require some equity in your house, the same as the first two options. When you refinance your loan, you can take the difference between the new loan amount and the old loan amount and pay for college. With this equity you will be able to pay for your college expenses and still deduct the interest on your taxes.