So you can buy high and sell low?

If you could get a 2.5 interest rate it would make sense. At today’s rates of 8.5 your margins are way too tight for this make financial sense. Any slight negative fluctuation and you lose your equity.

That’s a terrible financial decision.

My brother did that. He basically borrowed against the house and borrowed from credit cards. Spent it on tech stocks and is now a multi-millionaire.

He is in his 70s. He has grown kids who are well off. The risk he took was that he could have lost everything. He would have been quite willing to declare bankruptsy and move in with his kids (we are from the culture that is ok with that).

So, yes. This can be a great idea - depends on your life-stage and personal situation though.

Many of us are revisiting our allocations and moving into safer assets as the market is at an all-time high, so the idea of borrowing money at 8.5% to invest in equities right now sounds reckless.

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:People were saying to not invest in Nvidia 5 years ago and it was going to crash. Look at where Nvidia is now. Always remember that people always say there are bubbles and never are shamed into not giving their opinions again when these bubbles never burst.

People were saying Apple was a goner when Steve Jobs died too.

Hindsight is always 20/20. For every Nvidia, Apple, Amazon, there are thousands of companies that don't make it. Are you willing to bet your house picking the next future winners?

Apple has been printing money since the iPhone came out in 2008. That’s 17 years. Nvidia is not going away either. No one is suggesting investing in penny stocks.

you missed the point, i believe.

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:We did this but with a triple leveraged Nasdaq fund (TQQQ). With annual returns averaging 8-10% (not accounting for inflation, so more like 6-8% real returns), we are almost guaranteed an annualized return of 20-24%. Our current HELOC rate is 7.625%, so we are basically printing $50k annually for the next 25 years. I thought everyone did this?

I don’t understand this. You are paying 7.625% on money you borrowed to make (after inflation) a max of 8%? So you’re taking on a ton of risk to make, in the best case scenario, less than .5% on your money?

You’re going to get fked at some point by leverage decay if you have prolonged down days in the market.

What is leveraged decay? Wouldn't it be vastly outweighed by the 3x QQQ performance?

And that 8.49 is not tax deductable as over the limit.

Anonymous wrote:DH is convinced this is a brilliant move and has initiated a second mortgage on our house. $300K 30-year fixed APR at 8.49%. This gives us $950K debt total on a $1.3M house.

Wants to buy in to AI stocks before it is too late. Is everyone else doing stuff like this and I’m just overly conservative? This seems like a bad move.

Was a somewhat good idea in October 2022 during sell off, a very very very bad idea today with stocks in a bubble.

BTW my BIL did same thing in took a full finance IO AMRS mortgage of house to invests in stocks in 2004. it turned badly on him in 2008. He would of lost house if the stock crash had not tanked mortgage rates. In end he retired in 2020 with a 900K mortgage on a house he bought 30 years earlier and they had to sell and downsize to a little house as could not afford mortgage. When they should of had zero mortgage. Him cashing out lost them 900k

Anonymous wrote:

Anonymous wrote:People were saying to not invest in Nvidia 5 years ago and it was going to crash. Look at where Nvidia is now. Always remember that people always say there are bubbles and never are shamed into not giving their opinions again when these bubbles never burst.

People were saying Apple was a goner when Steve Jobs died too.

Hindsight is always 20/20. For every Nvidia, Apple, Amazon, there are thousands of companies that don't make it. Are you willing to bet your house picking the next future winners?

Apple has been printing money since the iPhone came out in 2008. That’s 17 years. Nvidia is not going away either. No one is suggesting investing in penny stocks.

Anonymous wrote:When 30 yr mortgage rates were sub 3% and there was no cap on SALT, the upside of borrowing more to invest in the market was pretty high. With mortgages at 8.5% and the SALT cap in flux, the upside is much more limited.

Agree. Borrowing at 2.5% was reasonable, but borrowing at 8.5% is just dumb.

I wouldn't do it for 8.49%.

We had a 2.5% rate on our mortgage. We talked about throwing extra money at it to pay it off early, but ultimately decided to let it run its schedule while investing the extra money in mutual funds. Over the long run, we earned more that the 2.5% rate.

The mortgage is done now anyway, but if I could get a new one at 2.5%, I probably would consider taking out a new mortgage in order to invest the funds. With the key caveat that we could pay off the loan even if the invested money went up in smoke overnight. How would you do with the second mortgage if the investment is lost? Would you still be able to pay it off, or are you counting on the investment returns to eventually pay off the mortgage?

Anonymous wrote:

Anonymous wrote:We did this but with a triple leveraged Nasdaq fund (TQQQ). With annual returns averaging 8-10% (not accounting for inflation, so more like 6-8% real returns), we are almost guaranteed an annualized return of 20-24%. Our current HELOC rate is 7.625%, so we are basically printing $50k annually for the next 25 years. I thought everyone did this?

I don’t understand this. You are paying 7.625% on money you borrowed to make (after inflation) a max of 8%? So you’re taking on a ton of risk to make, in the best case scenario, less than .5% on your money?

No, it's triple leveraged. So if the Nasdaq returns 8%, the fund returns 24%. TQQQ is up 36% year to date, actually. https://finance.yahoo.com/quote/TQQQ/

Anonymous wrote:Not sure why everyone is saying this is crazy, but at the same time, the consensus on here seems to be that paying off one's mortgage is a very dumb thing to do.

Taking out a mortgage to buy stocks is exactly the same thing as not paying off a mortgage so you can free up money to invest in stocks. Obviously, the terms of the loans differ, and that is an important distinction. But people are still stuck on this "borrow at 3% to invest at 10%" mindset and seem to ignore the fact that stocks have never been more expensive (or *almost* never been more expensive, depending on whom you ask).

While you might get 10% in the market over the next decade, you could very realistically get 2% per year (or even -2%). Even if you get 4%, taxes bring that down to the same 3% you get by paying off your precious mortgage. I guess I'm an outlier, but paying off one's mortgage actually seems like a no-brainer to me right now.

This depends on your mortgage rate. If it’s like OPs 8.49%, then yes. If it’s like many folks who have lower rates, like 3%, then no.

Anonymous wrote:Not sure why everyone is saying this is crazy, but at the same time, the consensus on here seems to be that paying off one's mortgage is a very dumb thing to do.

Taking out a mortgage to buy stocks is exactly the same thing as not paying off a mortgage so you can free up money to invest in stocks. Obviously, the terms of the loans differ, and that is an important distinction. But people are still stuck on this "borrow at 3% to invest at 10%" mindset and seem to ignore the fact that stocks have never been more expensive (or *almost* never been more expensive, depending on whom you ask).

While you might get 10% in the market over the next decade, you could very realistically get 2% per year (or even -2%). Even if you get 4%, taxes bring that down to the same 3% you get by paying off your precious mortgage. I guess I'm an outlier, but paying off one's mortgage actually seems like a no-brainer to me right now.

I beg to differ - one is playing with your money, the other is playing with house money

Not sure why everyone is saying this is crazy, but at the same time, the consensus on here seems to be that paying off one's mortgage is a very dumb thing to do.

Taking out a mortgage to buy stocks is exactly the same thing as not paying off a mortgage so you can free up money to invest in stocks. Obviously, the terms of the loans differ, and that is an important distinction. But people are still stuck on this "borrow at 3% to invest at 10%" mindset and seem to ignore the fact that stocks have never been more expensive (or *almost* never been more expensive, depending on whom you ask).

While you might get 10% in the market over the next decade, you could very realistically get 2% per year (or even -2%). Even if you get 4%, taxes bring that down to the same 3% you get by paying off your precious mortgage. I guess I'm an outlier, but paying off one's mortgage actually seems like a no-brainer to me right now.