Getting a Loan for Share Investments at Home Loan Rates

I liken it to a wedding cake, it’s the same as big fancy birthday cake but you’ll get charged double! The loan is backed by same property, same serviceability but they want to charge more. It won’t happen, but if the shares go bust I’m still fine paying off that loan. Same as if property market dropped a lot against a home loan, still have to be fine to pay off that loan.

 

Thanks Rolf, yes been working with 2nd tiers. Let me know if that’s part of the issue

 

Cba I usually do it in 200k - 300k chunk
I just directly negotiate with them

 

Inexperience shares investor often said shares can go to zero blah blah but it rarely happen to experience investor and if it does it be 1 or two business so the best it can do any damage to you is 10-20% but the other more than make up for it.

I all my years it only happened to me in 2 business and that in my early years when I am still learning but I also have many stock that double regularly and half a dozen that gives between 5-20 times return

Also margin loan has it usefulness if you know where and when to use it.

Shares market is all about risk management the return is a given when you have this built solid in your foundation

Have a concrete plan on risk management a few stuff up won’t hurt you at all.

The most important one is NEVER let one share that when it went pear shape cripple you and leave you no room to recover.
Never hang in to dog regularly clean it and offset other gain and move on to better business etc..,

 

What happens if say you want to invest $100K for a Mr and Mrs.

Is it better to have two single separate accounts $40K each or 1 joint account? Assume they both of similar age and income

 

Are you referring to loan accounts?
If jointly owning shares then a joint loan, if separately owning shares 2 separate loans would be better. This is so that A could sell shares and pay off their loan independantly of B.

 

Thanks Terry. Just say for a joint loan for owning shares jointly

If Mr happens to die before the Mrs, then Mrs do not have to sell Mr's shares but transfer to the Mrs just like the PPOR home transfer of name?

 

It is not a good idea to jointly own shares I think.

if you own the shares as Joint tenants then they will pass automatically to the survivor.
If you own as tenants in common then the shares would pass via the will.

If you each owned 50% separately it is much more flexible as one could sell their shares in a low income tax year and not effect the other.

 

Hi PandS
I’ve been looking at 2nd tier banks due to the lower interest rates. Do you consider there are advantages being with one of the majors? Or have you negotiated rates right down from their standard no frills rates?

 

I do it for convenience because I bank everything with CBA and half dozen of shares, options, warrants and CFDs account so moving my money around is easier and real time and save me a lot of hassle.

I have never bank with 2nd tier banks so no idea, always manage to get reasonable comparable rate or 10 basis point more which doesn't really matter that much to me in scheme of things

 

Interested in people's views on borrowing for shares when no non deductible debt exists ie they own their own home outright. A few old fogies!!!!!! Whose brains I constantly pick used to just borrow against their home and pay it off ASAP as p+I yet these days it seems the new age of people go IO with full offset to park funds in the offset and then refinance to a longer term after the until 5 year period is up which I assume requires great money saving and cash flow management in order to build up the offset and not fritter it away on useless junk and then realise after 5 years all the subsequent payments will rise.

Must be a mindset shift to being more comfortable with debt or better structuring and planning now days? ???!!!

 

If you were going to borrow to buy shares the using your home as security for the loan would result in the lowest interest rate. There would be no margin calls if the shares dropped in value - even to $0.

If you are renting and/or don't own property then you may have no choice but to use a margin loan or pay cash.

 

For me, the aim of the game is to maximise beneficial ownership of growth assets and let time do the hard work whilst managing the risk of permanent loss of capital. Sensible use of tax deductible debt can play a really useful role in that optimisation process. Of course there are a multitude of secondary considerations - legal, tax, cashflow, enjoying life, etc.