Mortgage Blog

Q: I have my primary home free and clear; and I have around $400k
on the rental property. I heard that it is better if I switched
the loans to the rental property, especially for the college financial
aid. is it true?
A: Yes, this is true. And I already have some borrowers did that.
(Please talk to your financial advisors about this topic, I will
only focus on the mortgage side). Basically if you have the equity
on the rental properties, this would be considered "assets" when
the kids apply financial aids at college admission. But they
do not count the equities on the primary home. That's one of the
reasons for the loan switch. For the tax-wise, the rental income
will cover all(or most) of the interest  of the rental property;
and use the standard deduction to cover the primary home. For some
cases, the borrowers can have even more deductions. The only
negative part is that the interest rate on the rental property
is much higher than the primary home.

So even for the mortgage industry, we also have the "planning",
right? And it is not necessary the lower rate the better.