Using revolving credit to invest in shares

We have a residential property portfolio with two properties. Circa 1 million value and 600k debt.

We own our own house debt free circa 600k.

We want to get some diversification going into index funds but don’t just want to dollar cost average a certain fixed amount each month.

We want to have some sort of loan arrangement where we can have dry gun powder so to speak and buy in the sharemarket when prices are depressed (think 2007/2008). When they are priced like today we would simply pay back debt.

As revolving credit floating rates are generally higher than fixed rates, how would we go about arranging such a plan?

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Originally Posted by epower

We have a residential property portfolio with two properties. Circa 1 million value and 600k debt.

We own our own house debt free circa 600k.

We want to get some diversification going into index funds but don’t just want to dollar cost average a certain fixed amount each month.

We want to have some sort of loan arrangement where we can have dry gun powder so to speak and buy in the sharemarket when prices are depressed (think 2007/2008). When they are priced like today we would simply pay back debt.

As revolving credit floating rates are generally higher than fixed rates, how would we go about arranging such a plan?

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By arranging revolving credit that allows fixing interest rate when the OD is going to be a stable amount for 6/12/24 months.Term depending on your cash flow & different rates available.

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Originally Posted by kiora

By arranging revolving credit that allows fixing interest rate when the OD is going to be a stable amount for 6/12/24 months.Term depending on your cash flow & different rates available.

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You can fix the interest rate for a revolving credit? I was under the impression it was always a floating rate?

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Originally Posted by epower

You can fix the interest rate for a revolving credit? I was under the impression it was always a floating rate?

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Yes it can be fixed at a lower interest rate.Check around.Certainly ANZ & Rabobank.

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Originally Posted by epower

You can fix the interest rate for a revolving credit? I was under the impression it was always a floating rate?

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I had a revolving credit for a couple of years, for exactly the same reason you would like to, except I put it all into high divie payers on the NZX. I then changed it into a fixed term interest only payment at no cost. The divies from the shares bought, easily service the loan. This was done with ANZ.

Got additional small flex loan floating 5%pa with Westpac (plus larger fixed term loan as well) was just for a small short-term play on a TO which returned 15% over 3months NKP.asx .. (purchased a boat with the profit) ..plan was to pay it off in full in the very short term .. now invested in other ASX plays .. can pay off any time I want which is great

Not hard to get these different loans for the Sharemarket if you have good asset equity aka property.. then res. rates apply

Unintentionally I have been doing this for 10+ years. I would make profits in the sharemarket and then sell (once I was happy with the gain) and I managed to pay down the bulk of one mortgage thanks to 3M and Pfizer....bought in 2011 and sold in 2013. Other successes closed off some flexible borrowings. Note: the funds used to purchase shares were mostly from bonuses and now we buy regularly as income is more than adequate.