October 13th, 2014 9:25 AM by Eric Fang
Q: I have my primary home free and clear; and I have around $400kon the rental property. I heard that it is better if I switched the loans to the rental property, especially for the college financialaid. 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 willonly focus on the mortgage side). Basically if you have the equity on the rental properties, this would be considered "assets" whenthe kids apply financial aids at college admission. But theydo 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 somecases, the borrowers can have even more deductions. The only negative part is that the interest rate on the rental propertyis 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.