Borrowing against property to invest in shares etc

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    Borrowing against property to invest in shares etc

    New here, just wondered what people in property thought about borrowing against a BTL property, to invest in shares (either plcs or start ups) - so relatively risky but big growth potential.

    Is it a totally crazy idea, or perhaps not, if you can afford the interest payments, and you accept the risk that if the investments don't grow (or even lose value), you may lose the BTL? (And I suppose also a risk that if the BTL price falls below the mortgage, then you are still exposed /in debt to the lender).

    I understand its a high risk, and fiscally unwise move, but does anyone have any other views or experiences?

    Any ideas what sort of % rate lenders would offer for this higher risk type of lending? I've had one quote around 6% which seems v high. Just curious.

    #2
    As long as you complete the mortgage application accurately, the lender is making a decision on the risk.

    I wouldn't do it myself, but I am risk averse.
    When I post, I am expressing an opinion - feel free to disagree, I have been wrong before.
    Please don't act on my suggestions without checking with a grown-up (ideally some kind of expert).

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      #3
      invest from cashflow, don't invest sacrificing assets.

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        #4
        This is what caused the large number of repossessions, and the Great Depression, after the Wall Street crash. I don't think that any Western lender has lent against share purchases since.

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          #5
          Borrowing at 6% (or even 2% right now) to invest makes no sense at all.

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            #6
            As above, borrowing at 6% would not seem to make sense. Borrowing at a very low rate would make more sense... but is of course risky.

            However, is it even possible? I recently made lots of enquiries in an effort to release equity from my own home, which is unencumbered. I never intended to pay cash for it in the first place (I was somewhat forced to, due to mortgage being declined late in the process). Having owned it for a while I wanted to extract the cash I never intended to put in originally, with a view to then being in a position to move fast on a cash purchase of an investment property. Brokers said no, since AML regulations do not allow it.
            There is a fine line between irony and stupidity. If I say something absurd please assume that I am being facetious.

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              #7
              The failure rate of share traders is over 90%. Less than 10 % of traders in the stockmarket win so the odds are against you winning.

              If you are really determined to become a trader , you should buy some books on fundamental and technical analysis before you start.

              Also buy the relevant monthly and weekly magazines on investing in shares.

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                #8
                Interested to know that 90% of people investing in the stockmarket have gone bankrupt. This fact should be widely disseminated....

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                  #9
                  I think he meant day traders and spread betters (contract for difference), not people actually investing.

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                    #10
                    That was my understanding as well. Big difference between day trading and buy-and-hold.
                    There is a fine line between irony and stupidity. If I say something absurd please assume that I am being facetious.

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                      #11
                      To a very limited extent that is sort of what I'm doing.
                      Instead of paying down my mortgages, with some of it, I'm buying shares.
                      Effectively 'borrowing' at 2.5% to buy large blue chips/indices held for the medium-long term.
                      Amongst other investments. From a low LTV, high ICR, high stress test long term portfolio.

                      But borrowing at 6% to buy start ups/individual small caps isn't investing, it's gambling.

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                        #12
                        actually if you know what your'e doing the odds are more like 50-50 at best. over the years i'm on plus but last year reduced the winnings significantly.
                        the problem is stock market is addictive, if you are winning all of a sudden you go for a million, then 10m until you go bankrupt.

                        I pulled out and just investing in properties. Safe reliable and stress free and similar returns

                        You want to do the oposite. Well good luck. Just remember - in 20 years you will still have that property whatever happens, stocks? not so much

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                          #13
                          Originally posted by boletus View Post
                          To a very limited extent that is sort of what I'm doing.
                          Instead of paying down my mortgages, with some of it, I'm buying shares.
                          Effectively 'borrowing' at 2.5% to buy large blue chips/indices held for the medium-long term.

                          Amongst other investments. From a low LTV, high ICR, high stress test long term portfolio.
                          That's exactly what I thought. Anyone who owns any shares at all but who also has at least one mortgage which they could theoretically pay down (which probably represents a high proportion of share owners) is effectively borrowing to invest.

                          Over the long-term, borrowing to invest in shares can make sense, as the risk premium means that the long-term return from shares has to be higher than the long-term cost of borrowing. Over the short term, however, who knows, and investing in individual shares (even if they are blue chips, let alone start-ups) as opposed to broad-based trackers etc. is a gamble regardless of whether you are using your own or borrowed money.

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                            #14
                            Hello James,

                            For the avoidance of doubt, I'm not advocating betting the house on a couple of blue chips.
                            But I do think there is a place for them in an already substantial portfolio of broad based trackers (I'm talking < 5% of total holdings). It can help to balance a portfolio.

                            e.g as landlords we are generally overweight* on property and financials.

                            Thoughts?


                            *No pun intended!

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                              #15
                              Originally posted by diseasex View Post
                              Investing in properties. Safe reliable and stress free
                              'course it is mate.

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