Q about borrowing on mortgage to invest

MiM

I'd been plannig to sell my house, which cost around £50,000 and is now worth about £150,000, and renting for a while, and trying to invest the profit while the housing market settles down.

I've now been pursuaded that if I want to invest I'd be better off keeping hold of a property and borrowing against the value, then investing the extra money.

I know this has an element of risk but I'm prepared to take it, I've had large gains from small amounts of shares in recent years and I'm keen to give it a go. I'm 40 and single so it wouldn't be disastrous if it didn't go to plan.

My question is, if I tell the Building Society that's my plan, do you think they'll be happy to advance the money?

Dan_Collins_2

Its all depends on how much you raise. Up to 75% of the val you will probably not even be asked! Up to 85% some will mind but most are happy as long as its legal 90-95% and you are going to far anyway!

Its your equity you can do what you like with it as long as you pay it back.

MiM

Thanks Dan. Just tried it but they told me I would need to give them a full breakdown of what I want the money for. She asked what it was an I white lied home improvments. She said that in the current financial climate they have to be seen to be a responsible lender and cannot give them money without details on what it's for.

Dan_Collins_2

What lender MiM and what % of the property?

Ah I have just read that you rent it out. You should be ok with some lenders but the B2L market has got stricter.

MiM

No, I don't rent it out, not sure where you got that from.

It's worth about £155,00 and I owe £45,000. I wanted to borrow £50-60,000 and she started asking questions...

Jonbvn

You should be sure that whatever you invest in has a significantly higher return than your mortgage/lending rate.

sarkin

Hi Mim This is one of the reasons to use a mortgage broker not only do we have access to all the best mortgage rates, but we also package and present the case to the lender so that it completes swiftly. However borrowing against your house to play the stock market is a high risk stratergy. If there is a down turn in the market not only will you loose your capital but you could loose your house as well. There are some web sites out there that let you trade with pretend money to see how you get on. Do you read the FT, what is your knowledge like, are you going to trade futures, bonds or just FTSE 100 and 250, some people do well penny trading on AIM. I read the Telegraph (you would'nt think so with my spelling) they always do an article on investment clubs. Anyway good luck and I hopew it goes well for you.

MiM

I think I got a pretty good deal but unfortunately I've nearly completed the switch to another deal with the same BS (Brittania).

My theory is the house price will not change for a couple of years (unless slightly south).

I know past performance doesn't tell you anything but I've got a few self-selected shares plus an ISA with self-selected funds through Fidelity.

They've all done pretty well. I started off with £3,000 in the ISA three years ago and it's now worth over £7,000. My house value hasn;t changed in this time. If I had done this with larger amounts back then I wouldn't need a mortgage anymore.

I do understand it doesn't always work out like this but as I see, having my biggest financial asset tied up in a static market like housing seems to me to be unwise and I want to make it work for me.