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Not too sure about Fin aid/ loans but I would assume it would help out on private student loan applications if they ask for assets but I am not sure if they do.
My bigger thought is why buy a house now? Assuming you want get your MBA at a school that is not in your city, you would be paying for a house you aren't using and an apartment you are using. The added housing cost would probably negate any positives derived from the higher assets.
Exactly the opposite.
First, taking a mortgage for a house doesn't increase your assets. Theoretically, you add a huge liability (the mortgage) that exactly cancels out the asset represented by the house itself. In reality, cash gets eaten up by fees and other closing costs, so your net assets DECREASE.
Second, private lenders don't care about your assets, since student loans are typically unsecured. They do care about your debt and total minimum monthly payments to service that debt. So adding a mortgage to the mix would almost certainly make you less creditworthy.
Fed loan eligibility should be unaffected as you can typically take Staffords and PLUS loans up to the cost of attendance. No idea what the effect would be for school-based fin aid.
@"brj"
Thanks for the correction. I was thinking about the liability of the mortgage as well but I remember briefly looking at private student loan applications from a credit union and it asked for debt not including mortgage and so I assumed they didn't account for the liability but it might have just been their policy.
Federal loans are at a flat rate for everyone,and you'd be eligible to take them out for the full cost of attendence, as long as you don't have a history of missing payments. Mortgage may effect your private loan ability, negatively or positively, depending on how much equity you have at the time and overall movements in the housing market.
As others have said, it's silly to buy a house if you're going to get a MBA in a few years - it's very likely you'll end up moving, and after transaction costs, have significantly less money than if you had rented and saved money during the time.
I could very easily rent it out since its the house will be in a large metro. Thats the main reason. According to the house prices here, I only pay around $300 more for a mortgage than for rent. (Might as well pay my own mortgage than my landlord's)
Yea but this would also take into assumption that your post MBA job will place you back in the same city your house is in. I know my parents didn't buy their first house until mid 30's simply because they wanted to be sure they would be staying in that city for a long time before they forked the money for a house and by doing that they made a bigger down payment. They had the cash to buy it out right but they put like 45% down and financed the rest at a super low rate to build credit.
Does it suck paying to a landlord? Yes, but if your career requires you to move while you are younger and you are renting, you can simply say f-you landlord, I'm out. This is much easier to do that putting a house on the market and wondering how much money you are going to lose in the sale after you consider all the cost of selling a house.
Is that after you pay taxes on the rental income? (yes, it's generally taxable). How much are you setting aside to freshen up the house each time you turn it? What about when a lessor breaks his lease? Who does the maintenance if you're across the country?
I have several friends who bought before MBA and it generally works out. Just want to make sure you consider all the angles.
Seriously, don't buy a house now. It will be an added financial complication that will add little to no value.
Another reason was that I have a significant amount of uninvested cash in my bank account. What am I supposed to do with that money now? The CD rates are too low and I am too wary of the market right now (seems too overvalued for my liking).
Also I am in New York right now-pretty sure this is where a lot of MBA grads come! Another bit of info: I am paying around $2k for my rent (more than a third of my income)
What's wrong with just saving it or putting in (very) conservative funds?
Ultimately, you are the best person to determine if this is a good idea but I would bet money that you end up losing money or the money that you gain is not worth the hassle and time you invest.
FWIW I had a family friend who bought a house in Metro NYC for his stint at MBB and late PE before deciding to M&A law. Got into most of the top law schools but got an opportunity to attend Northwestern and get a JD/MBA for far less that the cost of just a JD elsewhere. Ended up deciding to stay in Chicago after graduation. Sold house in NYC, all in all lost 12k, didn't learn his lesson and bought a house right away in Chicago. Recently led an M&A case between a large US corporation and a smaller European company and got approached by the CEO to become General Counsel of the European operations i.e. move to London, guess what he has do again?
You do make some very valid points. Especially 'other fees' like Broker's commission and stuff would dig into any appreciation I might capture in 2-3 years anyway.
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