Using mortgage to invest?

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justsayfire
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Using mortgage to invest?

Post by justsayfire »

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Last edited by justsayfire on Thu Aug 30, 2018 4:03 am, edited 1 time in total.
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SmileyFace
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Re: Using mortgage to invest?

Post by SmileyFace »

When you take out a mortgage the house is the collateral. When you sell the house the bank wants their money back.
orca91
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Re: Using mortgage to invest?

Post by orca91 »

justsayfire wrote:So what's wrong with this idea in general--other than the obvious risk? :)
That no mortgage lender is going to let you keep their $150k without you having a house as collateral.

Unless you sold the house under the table to someone that gave you straight cash, the title company handles all the monies changing hands during a house sale and pays off any remaining mortgage balance before you get any cash.
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whodidntante
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Re: Using mortgage to invest?

Post by whodidntante »

You can't sell the house out from under the bank in any legal way. The bank will have a lien on the property, which must be satisfied before you can sell it.
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justsayfire
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Post by justsayfire »

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Last edited by justsayfire on Thu Aug 30, 2018 4:02 am, edited 1 time in total.
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ray.james
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Re: Using mortgage to invest?

Post by ray.james »

one can take personal loan at 6-13% up to the max allowed. Probably hard to beat the interest rates with the market return.

People used to put money in savings account in 2007 at 5% by borrowing at 0% credit card transfers(no transfer fee). Probably the only free lunch I knew of in all these years.
When in doubt, http://www.bogleheads.org/forum/viewtopic.php?f=1&t=79939
madbrain
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Re: Using mortgage to invest?

Post by madbrain »

justsayfire wrote: Assuming you already have a place to live, take out a 30yr mortgage on a $150k house. Sell the house ASAP, trying to minimize fees, keeping the mortgage (is this possible?).
In a word, no.
In the USA and most developed countries which have a process for recording liens against property. No one will buy the house from you unless the mortgage gets paid off at closing time.
However, I have heard horror stories about people in India that bought a house and had a lender knocking on their doors years later to collect payment.
So what's wrong with this idea in general--other than the obvious risk? :)
The obvious risk if you actually manage to pull it off is probably going to be major legal problems down the road. What you are proposing is essentially a fraudulent sale, or theft. At the minimum, you would have civil lawsuits against you, possibly criminal, but IANAL.
madbrain
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Re: Using mortgage to invest?

Post by madbrain »

ray.james wrote: People used to put money in savings account in 2007 at 5% by borrowing at 0% credit card transfers(no transfer fee). Probably the only free lunch I knew of in all these years.
Yes, I did this to the tune of $150k. One bank checked my credit report, saw all the other maxed out cards, and closed my account. I still kept had the 0% terms and the original time to pay it off, though, about a year .

These days, 0% balance transfer offers almost always have a transfer fee. But there are exceptions. Chase Slate is one. But I believe they limit the transfers to $15k. Discover is another - at least, I was targeted for one recently with Discover It and took it. But they only granted me a tiny credit limit when you first open the account (I got $6k), so it is not that useful. Same limit I had with Discover previously 5 years ago before I closed the account.

CapitalOne offered me 0% for 18 months with 2% transfer fee - that is also pretty good, about the same effective rate as my mortgage, and I'm slightly tempted to use it. Would rather not pay the fee though in this low rate environment.
Nekrotok
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Re: Using mortgage to invest?

Post by Nekrotok »

for balances over $500k, it looks like fidelity charges 3.75% on margin, so you could borrow from fidelity for about the same rate? Just watch out for that margin call...
dopamineagonist
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Re: Using mortgage to invest?

Post by dopamineagonist »

What the OP is pry thinking about is a heloc. House paid off so tap in the equaty to invest.
madbrain
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Re: Using mortgage to invest?

Post by madbrain »

dopamineagonist wrote:What the OP is pry thinking about is a heloc. House paid off so tap in the equaty to invest.
But the OP wants to then sell the house from under the lender and keep the loan. Whether it's a HELOC or a mortgage makes no difference - they both use the house as collateral. OP cannot sell the house without paying them off .
Last edited by madbrain on Thu Sep 22, 2016 8:56 pm, edited 1 time in total.
pbearn
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Re: Using mortgage to invest?

Post by pbearn »

A better plan would be to buy and mortgage a million dollar house, sell it, and move to Mexico :wink:

Maybe the lenders thought of that though :oops:
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