I am interested in your opinion: if you had enough money to buy a home outright, would it be better to invest that money in an ETF and use it as collateral for a favorable loan? With mortgage rates still above 6%, a secured loan could potentially be as low as 2%, although it would have a shorter repayment term. Realistically, we might see around 4% given the current market conditions. I’ve heard that most banks will accept a loan-to-value (LTV) ratio of 50%. So, for a $500,000 home, I would need to hold $1 million in an ETF. What do you think?
Where are you seeing 2%? That seems way too low.
I get what you are saying. 2% may not seem like much for some investments. Are you thinking about other choices in order to get higher returns?
Most likely is. How low can it go, I am not sure. I am trying to make sense of this after reading it online.
Can you share where exactly you are seeing this? No offense, but it seems like there might be a misunderstanding.
A fixed rate loan secured by shares is likely to be more like 8% or more.
How may a loan secured by shares be obtained? I have worked with lenders before, and none of them ever give that.
It is not exactly a mortgage; rather, it’s a margin/asset loan made possible by your brokerage. The loan would actually be secured by shares, and you would simply utilize the income to pay off the house in full.
It makes perfect sense to have money invested in the market with mortgage rates at 2%. It is closer at 6%, but I think it’s reasonable to expect long-term stock market returns of 7% to 10%, so I’d still stick with my investments.
You can’t get a loan for 100% of your brokerage account.
For me, it would depend on the size of the investment account and the taxes due if I were to sell.
A mortgage is a secured loan