Consumer Loans vs Mortgages
I went here: Consumer Loan Law. It seems that a consumer loan is anything other than a business loan or mortgage.  However, in California it seems to include a mortgage. It's a bit weird to see that a HEL can be considered a consumer loan even if it is the primary or the only loan on a property.  Getting a HEL can be a great low cost way to (re)finance a property as they tend to have low or no closing costs and lower interest rates. Here's a good definition of a consumer loan: What is a Consumer Loan? As@Pete B. pointed out, there are some states (California loves to be the oddball, doesn't it?) that treat some loans in a more unconventional manner, but the gist of it is that a consumer loan is normally unsecured, meaning there's no collateral or lien associated with it.  A signature loan would be a good example of a consumer loan.  Many times, loans made by non-banks (finance companies that loan for consumer purchases, for instance) would be considered to be consumer loans. I hope this helps. Good luck!
Risk is the problem, as others have pointed out. Your fixed mortgage interest rate is for a set period of time only. Let's say your 3% might be good for five years, because that's typical of fixed-rate mortages in Canada. So, what happens in five years if your investment has dropped 50% due to a prolonged bear market, and interest rates have since moved up from 3% to 8%? Your investment would be underwater, and you wouldn't have enough to pay off the loan and exit the failed strategy. Rather, you might just be stuck with renewing the mortage at a rate that makes the strategy far less attractive, being more likely to lose money in the long run than to earn any. Leverage, or borrowing to invest, amplifies your risk considerably. If you invest your own money in the market, you might lose what you started with, but if you borrow to invest, you might lose much more than you started with. There's also one very specific issue with the example investment you've proposed: You would be borrowing Canadian dollars but investing in an index fund of U.S.-based companies that trade in U.S. dollars. Even if the index has positive returns in U.S. dollar terms, you might end up losing money if the Canadian dollar strengthens vs. the U.S. dollar. It has happened before, multiple times. So, while this strategy has worked wonderfully in the past, it has also failed disastrously in the past. Unless you have a crystal ball, you need to be aware of the various risks and weigh them vs. the potential rewards. There is no free lunch. A huge part of the problem is that low income people have been very heavily marketed to by the online and for profit colleges because they were eligible for financial aid (mainly loans) and were seen ONLY as a straw through which to suck money out of the government by these “schools”. Because they were only interested in the money, there was no attempt to qualify students in many of these schools or provide any support to them. When students dropped out their “counselors” would keep signing them up for classes that they didn’t know about or attend.   Because a lot of the schools are bullshit schools with either no reputation or a poor one, even those who finished were largely not able to get the high paying jobs they were promised in order to lure them in. This goes for low income students, especially ones whose families have no previous experience with post high school education, across the board, and all of this group is far more likely to default (because they were basically ripped off, got nothing useful from these bogus schools and were often outright defrauded, and do not have the income they were told they would have when agreeing to the loans) but because there is a higher percentage of minorities among this group they are more likely to be defaulters. But our unforgiving student loan system doesn’t differentiate between loans for real eduacation and loans for these rip off “schools” so you are still 100% on the hook regardless. Even if they signed you up for several more semesters’ worth of classes after you “withdrew”.  It’s a lot like the mortgage collapse—desperate to keep making money, the lenders targeted increasingly less qualified people who were also naive about the entire system and sold them terrible loans (sometimes talking them out of more reasonable options) and then when the whole thing starts to fail, it’s all “because the government made the banks give mortgages to poor black people”.  The institutions suck up the money and leave bewildered poor people holding the bag, now even poorer with nothing to show for the debt they will literally be digging out of forever.   The Obama administration FINALLY took some steps to control the predatory for-profit institutions and try to sort out who had been ripped off vs people who had genuinely received any useful education, but of course the new Sec of Education is doing her best to roll all that back.  And most of the victims aren’t teens either. They are adults with kids who were trying to do something to better themselves and their lives and got screwed over. Some of these middle aged people will literally be having their Social Security garnished to pay for these loans. It’s disgusting, and even more so to say it’s all affirmative action. There's several different trade-offs wrapped up in your question. In general, refinancing a mortgage to a lower interest rate makes sense if you are certain you'll be living in the house for N years.  N depends on your closing costs and points.  Basically you need to calculate the break-even point for when the savings from the reduced interest rate exceeds the cost of the re-fi.  When I refinanced, the broker did the calculations for me for a range of options, maybe yours could as well. The trade off in selecting 30-year vs. 15-year is between monthly payment and total outlay.  A 15-year mortgage will have a higher monthly payment, but the total money that is paid out the bank (rather than to your equity) will be less. Using the Heloc to do the down payment seems sketchy; plus then you have two loan payments you're making each month.  Why not keep it simple and look for a $250k loan with 5% down?  Presumably with the current mortgage you already put in a good down payment, and have built some equity up. "You need to do a bit more research and as @littleadv often wisely advises, consult a professional, in this case a tax layer or CPA. You are not allowed to just pull money out of a property and write off the interest.  From Deducting Mortgage Interest FAQs If you own rental property and borrow against it to buy a home, the   interest does not qualify as mortgage interest because the loan is not   secured by the home itself. Interest paid on that loan can't be   deducted as a rental expense either, because the funds were not used   for the rental property. The interest expense is actually considered   personal interest, which is no longer deductible. This is not exactly your situation of course, but it illustrates the restriction that will apply to you.  Elsewhere in the article, it references how, if used for a business, the interest deduction still will not apply to the rental, but to the business via schedule C.  In your case, it's worse, you can never deduct interest used to fund a tax free bond, or to invest in such a tax favored product.  Putting the facts aside, I often use the line ""don't let the tax tail wag the investing dog."" Borrowing in order to reduce taxes is rarely a wise move. If you look at the interest on the 90K vs 290K, you'll see you are paying, in effect, 5.12% on the extra 200K, due the higher rate on the entire sum. Elsewhere on this board, there are members who would say that given the choice to invest or pay off a 4% mortgage, paying it off is guaranteed, and the wiser thing to do. I think there's a fine line and might not be so quick to pay that loan off, an after-tax 3% cost of borrowing is barely higher than inflation. But to borrow at over 5% to invest in an annuity product whose terms you didn't disclose, does seem right to me. Borrow to invest in the next property? That's another story." Most people today (and maybe regardless of era) are irrational and don't properly valuate many of their purchases, nor are they emotionally equipped to do the math properly, including projection into the future and applying probabilities. This compounds.  Imagine that each individual is bound to others by a rubber band and can stretch in a certain direction.  The more your neighbors stretch, the more you are both motivated to stretch and able to stretch.  These are crudely analogous to consumer wants as well as allowed consumer debt.  The banks are also within this network of rubber bands and much of their balance sheet is based on how far they've stretched on the aggregate of all connected bands (counting others debts as their credit because it will presumably be repaid), and every so often enough people's feet slip that a lot of rubber bands snap back.  This is a bubble bursting. Used car dealers will sometimes deliberately issue high-interest-rate subprime loans to folks who have poor credit. But taking that kind of risk on a mortgage, when you aren't also taking profit out of the sale, really isn't of interest to anyone who cares about making a profit. There might be a nonprofit our there which does so, but I don't know of one. Fix your credit before trying to borrow. Yes, one is certainly better than the other. Which one depends on your priorities and the interest and tax rates on your student loan, your savings, and your (future) mortgage plus how much you can afford to save and still enjoy the lifestyle you want as well as how soon you want to move out. Basically, you havn't given enough information. I completely agree with requirements, like GPA.  I think that weeds some bad loans out, and is a much better version of tough love than non-dischargable debt once you are out of school.    The non-discharged debt problem is tough, and I think this aspect ties into the college cost inflation:  If you, as a lender, basically have a perpetual lien on someone because they can't discharge the debt, then you (lender) can  issue riskier loans, and more of them.  I haven't heard the term 'subprime loans' used to describe student debt, but I think the term is just as applicable to bad student creditors as it was to bad home creditors in the housing bubble.  There seems to be moral hazard involved for lenders that have non-discharge covenants, and so they lend, even after government lenders tell people 'no more.'