Hi,
It was my understading too that in my example ( 1 million debt , 750K for primary home - main unnit - which is 750 sqft and 250K for 250sqft ADU), if 30K is the amount of principal paid in the year entire 30K is adjusted towards the 750K debt on the primary.
However, why do you think debt ratio ( percentage of debt for each unit) has to be recalculated every year? Debt allocation happens when you actually borrow. Or rather strictly speaking, debt is (re)allocated when you change the usage of 250sqft from your primary to ADU rental. Given that the allocation of sqfootage for rental ADU or any of that isn't changing, why does one need to reallocate percentage of debt for each unit every year?
@Rick19744
PS : 30K in the original example getting adjusted towards 750K debt on primary makes sense to me. Say I had two separate loans, one on primary and other on a rental, given that rental interest is totally deductible against rental ncome and that primary mortgage is not tax deductible for interest accrued on amount above 750K, I would first pay of primary (for sure till outstanding principal falls to 750K)
