16 August 2017
RAISING MONEY AGAINST YOUR HOME FOR INVESTMENT PURPOSES
WITH INTEREST RATES AT RECORD LOWS, A GROWING NUMBER OF INVESTORS ARE SAID TO BE SO ANNOYED AT POOR RETURNS ON SAVINGS ACCOUNTS THAT THEY ARE BORROWING AGAINST THEIR HOMES IN ORDER TO INVEST. ACCORDING TO THE FINANCIAL TIMES, THIS IS A GROWING TREND AMONG WEALTHY HOMEOWNERS.
However, before you decide that betting the family home on the stock market is a good idea, there are a few things to consider. The first is which banks are likely to lend on such a proposition. Most high-street lenders are reluctant to agree a mortgage if the borrower is raising capital in order to invest in stocks and shares. The private banks, on the other hand, are likely to be more flexible, assuming the borrower meets all of their criteria – which will rule out a lot of people.
There is nothing new in this as such, with sophisticated, high-net-worth borrowers often taking on debt when they don’t really need it for a variety of reasons – tax planning, diversification of assets and cash-flow management, for example. With mortgage rates so low, there is a compelling argument for doing so as long as the borrower can meet current mortgage affordability assessments.
As with anything, it is important to seek independent mortgage advice before approaching random lenders and asking if you can borrow against the family home to fund the purchase of a wine collection or stocks and shares.