Brendan Burgess
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so you are borrowing €125k @ 5% , or about 3% after tax to invest in equities, the return on which will be taxed. That is just not a good idea.
Moneymakeover Inheriting 200k, thinking to make leveraged play on housing. Mortgage paid off.
- Thread starter Sr. Tayto
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so you are borrowing €125k @ 5% , or about 3% after tax to invest in equities, the return on which will be taxed. That is just not a good idea.
Yes, just for clarity my recommendation is to remortgage the existing family home mortgage at the best available rate if leverage is what the OP wants, then just invest the full 400k in equities instead which is effectively 50% leverage.
Brendan Burgess
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But neither Avant nor any other mainstream lender will do that.
No, I have 200k in cash to start, I borrow 175k to mortgage a new house, using 75k deposit.
200 - 75 = 125.
Hopefully that is clear enough for you. My question is about the upsides vs disadvantages of leverage and whether a second house needs to be BTL or does the bank really care since we can obviously afford the repayments of ~800e a month
I suppose the only downside to this approach is that the house we are in is more than likely our "forever home", so if we can never realistically sell it then we'll never realise the gains on this loan so would it worth it to pay this loan off and create leverage for another investment.
Brendan Burgess
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You will have €175k in borrowings
You will have €125k in investments
Let's assume you had €50k in investments and no borrowings.
would you borrow €125k to invest? Of course, you wouldn't. Well you shouldn't.
So the two are the same.
You should not borrow to invest = if you have borrowings and investments you should sell the investments and pay off the borrowingsl
You will have €125k in investments
Let's assume you had €50k in investments and no borrowings.
would you borrow €125k to invest? Of course, you wouldn't. Well you shouldn't.
So the two are the same.
You should not borrow to invest = if you have borrowings and investments you should sell the investments and pay off the borrowingsl
Brendan Burgess
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Again, this suggests that you are out of your depth when it comes to financial matters, so you really should not be embarking on risky ventures.
I’m not sure if you’re misunderstanding me Brendan, but I’m just talking about a simple switcher to get a better rate.
I suspect you might think I’m suggesting a HELOC-type arrangement to fund equity investments.
By keeping the PPR mortgage instead of clearing it with 200k from inheritance, that 200k is now available for other investments.
It's almost as if people come to a forum looking for answers. After lurking for a long time I said, why not call this out: this is an approach I see you, Brendan, take often on this forum, to tell people to stick to their lane. While in one way it's solid advice, it rarely enlightens people. It's the easier approach, but subsequent readers are then left with the same questions that the original posters had. Teach a man to fish and all that.
So, can anyone speak further to this : can you take a second mortgage on a house without it being a BTL mortgage? I presume the bank asks for a decleration that the second house will be the PPR, but how is this enforced?
And for those people who have multiple properties, did you buy them cash? It seems the downsides outweigh the upsides with property investment vs market investment if you cannot avail of leverage - higher tax, stress, tenancy holdovers. Or did you go the BTL route?
To add to this, I appreciate everyone's input and will stick the cash in shares!
For anybody else who, like me, didn't know what this means...
Home equity line of credit - Wikipedia
If you mean a second mortgage on a property that is already mortgaged then there's little to no chance of any lender agreeing to that.
Most of these threads would be resolved with a little bit of work in excel. The discussion could mainly be about what assumptions to use for the different scenarios, what the different tax treatments are, and then questions like will anyone goce a second mortgage on a property.
The assumptions here would need to be:
The assumptions here would need to be:
- Mortgage interest rate
- Rental yield
- Vacancy periods
- Capital appreciation on property
- Share price growth
- Dividend yields.
Putting a value on the expected outcome here would likely clarify things
Yes and no. Some answers don’t require spreadsheets, like over-concentration in a single asset class in a single, very small geographic region is not a good idea!
No, but you’ll have an extra 200k worth of equities that has compounded over however many years.
Yes, but some people don't care about that. Let them see the slim returns after interest and tax, and add another point to the list of cons
In my opinion, concentrating so much of one's overall portfolio in a single asset class/geographic region (Irish domestic property), and thus diluting diversification, is very questionable in the first place. To do this via leveraging is even more questionable. But I get the impression that the original poster may be resistant to taking such feedback on board.
Brendan Burgess
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Hi Sr.
In my first draft, I was more polite. But then I realised it had to be said bluntly.
you are in a great position. You have the financial independence to change your career.
You are putting that all at risk by your ideas. That is why I suggested that you keep things simple and don't get involved in advanced financial engineering which might well work out but the upsides simply do not justify the risks involved.
Askaboutmoney answers hundreds of specific questions every week. But on Moneymakeover issues, they are much more complicated. and sometimes we have to answer questions which were not asked, but which should have been asked.