Hi Bull,
1st ever post, I've been reading for awhile now.
Is it wise to borrow against house to buy shares? I'm new to shares too.
Appreciate your thoughts.
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Same boat. I only started this year because the ASB started charging me for make extra mortgage payments so I though I'd stick my spare cash on the stock market. Next thing I was emptying the revolving credit account. So far this year I am up about 2 months pay (which sounds impressive except I don't get much pay!). So what began as cursing the bank turned into a why didn't they do that 2 years earlier!
Adam - I would work out how much you want and work backwards to the share price that will give you that exit strategy.
im no investment advisor , but my thinking for me was i had all this equity in the house which wasnt earning anything so as long as a wasnt silly in how much i borrowed at 5% (cheaper than a margin loan) and i invested in good div shares they would pay off my loan over time and i might make some growth as well. i started doing this in 2008 by the way i wouldnt do it now as the market has run a long way since then. i might do it again after the next crash though.
I agree entirely... I have built my portfolio over the last 10yrs and am not prepared to risk it with where I see global markets heading in the medium term. There will still be money to be made when this bull cycle turns bear but you will have to be a lot more careful than over the last few years, especially if you have bet the house on it. My 2C.
Who knows ? The world is a very uncertain place. Anything from China getting upset with Winston to a biological issue with our dairy herd could affect them.
If it was me....I would put in a sell price...say 12.99 ...and sit back and see what happens. If they didn't sell in say 3/4 weeks...I would ease it back a bit. Getting mortgage free / or under control is important, especially if interest rates start to go up. If they sold I would be very happy with myself even if they continue to increase a bit. You have done really well with them. Congratulations/
Once your mortgage is where you want it....you can always make another decision then with respect to investing in the market.
Well done.
Good luck.
RTM
My advice to my clients is you should aim to be mortgage free no later than 55. Getting too long in the tooth to take risks with one's home after that and that includes using one's home equity to borrow on other rental properties. With only 10-15 years to go till retirement one is best to avoid leverage altogether after 55 in my opinion. Obviously people don't pay off mortgages overnight so its best to have a goal of being debt free by 55 and work towards it.
Debt is a good tool to build wealth with in your 20's, 30's and 40's in my opinion but like all things, in moderation. (my 2 cents)
Oh. Borrowing to buy a fancy boat is not smart debt...take a word from the wise who has been there and done that in their 30's.
Depends on how much your borrowings are as a percentage of your total portfolio, mine are about 15 %. Borrowing at 5% or under is fine in the current market, by the time you claim the interest as an expense your still going to do well by placing the money in solid high divvy yielding companies.
Like Bull I wouldn't be worried about borrowing against the house as long as the cash flow of all the investments can be easily managed.My view is an investor learns most about investing by just doing it & I wouldn't be worried about the next crash.By investing in the here & now,you can learn the smarts to be better positioned with 'knowledge' for the next bull market.Is Buffet worried about the next crash?NO.Why?He invests in good companies and doesn't get concerned about the daily noise of share price movements.
Adam is asking about selling ATM though.. paying down a mortgage or investing is not the question.. he's already made that choice and now he has to move the invested money back to the mortgage. so anyone else got advice on how to sell ATM? picking a number you like doesn't seem that helpful - I could pick $150.. i love that number - but there's very little chance ATM gets there in the next 6 months, I think!
On the back strong reporting from Bellamy's across the ditch , I'm picking ATM could surge past $13 mark today if shorts are in a hurry to cover.
Dont worry about that. I am content taking that role - frees everyone else up to post and learn what ever they like
Following ATM is like being on a roller coaster. If you are a trader then money to be made short term. I'm not - I'm taking a long term view. That is five years. Happy with the ride . But I would be very nervous if I know I had to exit by a certain date. I'd sooner exit on my own terms.
I'd be inclined to keep riding the highs on the way up. Come up with a number off this high and that's when you sell. Be content with your gain but don't get greedy.
Long term I see ATM doing better than 5% per annum (or the prevailing mortgage interest rate. Especially when dividend kicks in. So the question is how best to utilise your capital
Alternative to reverse mortgage borrowing would just be getting a broker that offers margin lending or consider CFD derivatives. You can leverage up as much as 8 times with the cost of borrowing smaller than the mortgage rates probably..
If I was you Adam in your situation I would be selling a third of your holding now, wait a week and sell another third, if the price starts dropping then sell the rest.
Yes has to decide for himself.
How about picking a number based somewhere around a recent low - sell if it drops to that price before the funds are needed, if not sell when required.
I would follow in similar steps. Whether it goes up or down you need to be content with your profits.
Many times you hear “had I just waited”, or “damn I should have acted sooner”. I can tell you I never get it right when it comes to selling. It always does the opposite to what I want haha