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?
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Where are you seeing 2%? That seems way too low.
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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?
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Most likely is. How low can it go, I am not sure. I am trying to make sense of this after reading it online.
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Can you share where exactly you are seeing this? No offense, but it seems like there might be a misunderstanding.
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A fixed rate loan secured by shares is likely to be more like 8% or more.
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How may a loan secured by shares be obtained? I have worked with lenders before, and none of them ever give that.
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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.
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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.
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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.
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A mortgage is a secured loan