Borrowing to Invest in Shares or ETF

hi all,

I'm looking to borrow $200k or $300k against my property, to invest either directly in shares, or in an ETF.

What's the best way to go about this?
a) which bank would offer a competitively priced loan?
b) should I contact any financial advisors / accountants about setting up the appropriate structure?



  • Don't do.

  • +36 votes

    Nah man you should absolutely not contact a financial advisor/accountant for a $200k - $300k leverage purchase.

  • Hugely volatile market, recession looming, no idea of when the current crisis will end, no financial knowledge.

    Definitely drop 200k on some shares right now with no advice.

    • and lose another 15% on Monday as the dow will fall by that amount tonight as traders never want to leave open positions over a weekend and will dump tonight

    • Thanks for your views. Here's my advice for you. The coronavirus will escalate, however the world will get through it by September or October. The economy is in decline and might not see any improvement for a couple of years. The economy will recover too.

      If you can afford it, now is the time to be ready to get back into the market.

      • 6 months ago was the time to be ready for a market crash. Most people won't be since it's so difficult to predict. Practically no-one in Australia will have experience with what's happening right now. We never experienced the recessions people overseas have lived through.

        You should take a read of the forum posts back in 2008 as people were going through it, those leveraged up while the market continued to crash. They continued to buy and leverage further, yet the market continued to tank and wipe them out.

        I don't have the bookmarks and it was a while back when I was reading through them. Definitely worth the read if you can track that stuff down

        • I don't need to. I already have fond memories of watching my managed funds lose value! lol.

          Why do say that "6 months ago" is the time to be ready?

          • @clandestino: Not 6 months specifically. Before it happens is the time to be ready, and no-ones really good enough to predict it (though some like buffett are always cashed enough, and patient)

            how you feel about watching the 'value' get wiped out isn't the issue

            it's banks hounding you to deposit cash or they'll liquidate your shares for as little as they can get for them.

            people who took out 0% interest credit cards suddenly saw their terms changed, their min payments and rates being jacked to ridiculous levels, and then being charged fees after fees when they don't have the funds to pay back this supposed 'free loan' that they had been enjoying for so long

            Some companies needed bailouts (citibank perhaps?), and the shareholders got diluted down to tiny fractions of what they once were. Their shares never regained their original value, and you can't tell this by simply looking at a graph showing stock price appretiation

            • @idjces: why would banks be hounding me to deposit cash?

              Regarding "predicting", I'm not sure what you're referring to here either. You mentioned 6 months ago as being the right time, but you haven't explained why. I'd say, getting ready now is the right time, to make an investment at any random point over the next 3 or 4 months.

              credit cards - again, irrelevant for me.

              dilution of stock value - a risk for any regular equity investment.

              • @clandestino: I think what @idjces referring to is getting a margin call from banks when you're using margin loan and your LVR exceeds the limit set by your lender.

              • @clandestino:

                I'd say, getting ready now is the right time, to make an investment at any random point over the next 3 or 4 months.

                Sure, the earlier you are ready the better. I would not say it's the 'right' time. You (me, and everyone), missed that window as per my comment:

                Before it happens is the time to be ready, and no-ones really good enough to predict it


                I was trying to give some examples of 'you don't know what you don't know'.

                Despite a lot of people saying it's a bad idea, apparently you think it's a good idea to

                borrow $200k or $300k against my property, to invest either directly in shares, or in an ETF.

                I suggested that you go take a read of people's first hand experiences in similar times, because none of us here have that experience.

                • @idjces: While I agree with your point (it would be stupid to do this), you don't seem to understand their argument

                  They are talking about buying in a trough, you saying to "be ready 6 months ago" doesn't make a lot of sense as it was a peak.

                  The risk is obviously that we aren't at the bottom of the trough yet, but given investing is a long game that shouldn't matter too much. My investments were made during the good times, they will eventually recover. Anyone who invests today will also recover- and quicker than I will.

                  • @callum9999: Oh i agree it's a much better time to buy now than any other period in the past 3 years. It's the borrowed money I have arguments against, and I only make them because most people never seem to consider them.

                    Me saying "be ready 6 months ago", bad phrasing on my part, means be ready before the markets began to tumble. Good luck coming up with large sums of cash after markets have started tumbling.

                    Once it's begun, everything becomes far more difficult. Sourcing credit for your investing becomes far more difficult (the worse things get). Your sources of income dry up (whether that's employment, dividends, business etc). So how are you going to meet your current obligations when you are wanting to now take on further debt. Creditors decide to change their terms and demand higher repayments, or revalue your collateral.

                    Most people seem to assume that the only thing that changes is shares are now 30% off.

                    There is no mention of the OP's (or anyone's) particular financial position in these arguments.

              • @clandestino: If you don't immediately recognise a reference to a margin call, then you aren't ready for a margin loan. ESPECIALLY during such a volatile time.

      • The problem people have with your idea is that you intend to lever your investment.

        When you wish to buy into the market because it is low (cheap), and you're a long-term investor unconcerned by near-term volatility, the term "If you can afford it" means "If you have a sufficient quantity of unencumbered cash". Large leveraged investments cannot survive significant volatility if you don't have the cash to answer margin calls from your bank. Holding leveraged investments through a bear market is not simply a test of nerve, but a test of your overall financial ability to service debt where the allowable amount of that debt can fluctuate with the value of the underlying assets.

        From what you've written, it seems like you do not understand the full implications of leveraged investment, therefore the answer to your question about obtaining financial advice is a resounding yes.

        • I just thought I'd comment on this to point out that I didn't notice that OP intends to borrow against his home. Presumably this would remove the possibility of margin calls, significantly reducing the problem posed by volatility. Could be a good idea.. but I still recommend having a chat to someone who knows what they're talking about.

      • Lots of fear around, but you can see through that. There are also plenty that can see what you can: some glad they have funds available, others like yourself (and myself) wondering whether we can make some funds available for this opportunity.

        If you expect your money back in the short-term, I'd take the advice of the naysayers.
        If you can be patient and wait for the market to recover, then go for it.
        (Actually, I'm open to the idea that one day the market won't recover, but in the apocalypse money will be worthless anyway.)

        Just be careful with margin loans - I think they can ask for their money back if the stock value drops - you need to be able to finance that.

        I'm be looking at getting funds privately. Interest rates are incredibly cheap, the market is under-priced - now-ish is a good time to make a long-term invest I reckon.

      • You don't know the market as much as you think you do. What makes you so certain that the economy is going to recover? It could take years or decades based on substantial evidence and comparing our situation to what it was during the GFC.

      • All these people saying don't - we do not know the OPs personal circumstances - it might be entirely reasonable and prudent.

        I would do this myself, except the paperwork is immense, waiting time > 1 month with my bank and I have serviceability issues (but a very low LVR)

      • Bro can you predict the Power Ball too?

      • @clandestino:

        That link I could not recall, popped up on reddit. It's an excellent read on various situations to be cautious of

  • Wrong time to be borrowing, especially to invest in shares which are currently nose diving.

    Don't need a financial adviser/accountant to tell you that especially with a recession looming.

    • because interest rates and stock prices are so high?

      When do you reckon would be the right time - A couple of months ago?

  • If you want to refinance ask a broker.

    A structure - you think company income tax accounts are cheap? $2k a year then you need to pay ASIC fees which is like $300 per year.

    • I'm pretty sure you could set up a trust for a one-off fee of a few hundred bucks… I am going to be mighty annoyed when I get around to estate planning if you're right and I'm wrong.

      • Like you don't have to do tax returns for a trust? That is like $2k a year. Unless you are rich otherwise you'd be putting assets under your partner's name first.

      • Setting up a family trust under a company structure will cost you around $900-$1500 if you do it yourself. Depending on the terms of the Trust deed it will dictate what you need to do at tax time, some say full financial reports yearly - which may run you around $2000 a year. Mine are optional and because its just a trust managing shares we elect not to run full financial reports, we just do a one pager, and have the directors (my wife and I) sign-off on them.

        Tax return will be anywhere from $300-1000 depending on who you use, or you can do it yourself but I would pay the first time.

  • Better to put it on black.

  • nah

  • Guys, I do worry about your line of thinking…. 1 month ago it was "don't sell". Now today, it is "don't buy".

    What you should be realising, is that you have an opportunity over the next 2 or 3 months to invest in the share market, with interest rates at record lows. Assuming that you are happy to hold your investment for the long term, then now is the time.

    • Nobody can pick and top and nobody can pick the bottom.

      What we do know is we're somewhere closer to the bottom. I've got some money on the side lines waiting but I am looking for the following:

      1. When will the UK go into lock down? Within next 2 weeks if so then it might mean US goes into lock down 2 weeks after.
      2. If the US goes into lock down the market will fall through the floor from all the panic.

      If #2 doesn't happen then we're probably within 10% of the bottom. If #2 does happen look for another 50% drop from here.

      It depends on how drastic actions governments are willing to take. If the world goes into lock down for 30 days. We get health care professionals to find all the infections and get them into treatment centres then we can get back to normal 30 days after that, which is what China's done.

      IF we play it nice because we want to have our cake and eat it at the same time (try to make money and get life going on as normal) this could last until June at the soonest in the northern hemisphere if it doesn't get us during southern hemisphere winter then passing back to the northern hemisphere for the next winter.

      It isn't a normal market. People are talking like it is a normal market. Don't refinance 200k and put it on the index. Even if you do put $10k every time the index goes down 5%. Longer the virus is allowed to pass around the more damage this is going to do. Politicians are not good with any decisions (as we saw in the GFC), this is a fast moving virus.

      • Thanks for your reply.

        In my opinion only - I would not be waiting for the trigger points that you refer to above (UK lockdown, USA lockdown). This is merely speculative. You've already stated that nobody can pick the top or the bottom - it is just guess work.

        What is not guesswork though, is the following. If you have a long term (10-15yrs plus) outlook for your investment, then buy when the market is low. There's no need to try and guess the lowest point, just to make a few extra % points.

        • LOL

          The ASX200 was 6700 points on 26/10/2007 then GFC happened.

          Low was around 3145 points on 6/3/2009

          Next time the ASX200 was 6716 points was 27/9/19.

          The learning:

          1. Took 1 year 5 months to get to the bottom. Coronavirus been around since Dec 19.
          2. The higher you enter the longer it takes to get your money back.

          It isn't about timing the market but time in the market. Just as much of a problem as mistiming the market.

          • @netjock: Doesn't take into account dividends. Look at total return chart you'll see an investment in ASX index fund would have got back to even a lot sooner than 2019 when accounting for dividends.

            Also this assumes the investor does nothing between 2008 and 2019. If they don't panic, didn't lose their job and stick to their plan and invested a set amount each month, then they were buying stocks at the very lows between 2008 - 2010 which would have seen them positive even sooner.

            Other markets such as the US S&P 500 also reached parity with and exceeded the pre GFC high by a lot more than the ASX.

            The lesson is to be well diversified by geography and segment and to stick to your plan and not panic sell.

            • @meumax: If you bought the etf you get 4% dividend. Provided dividend did not drop. You think after financial crisis they were paying 8% dividend yields on the index? The dividends dropped.

              You also fail to take into time value of money. Inflation is at least 2% if not 3 - 4% real inflation in this country. Therefore 4% dividend is just keeping up with inflation.

              My numbers didn't even include time value of money, just nominal which makes the idea of investing in the Australian index even worse. The only reason Australian index made it back to pre GFC heights is mainly due to global organisations like CSL, BHP, RIO. The domestic companies such as Woolworths + Banks due to lower interest rates to increase the share price because people are chasing yield.

              Other than a few selected small cap companies like Afterpay, Wise tech etc have really been going backwards.

              Good luck on having all the other stars line up. Like not selling, losing your job. You know the index also has survivor bias (excluding companies that go bust or fall outside the index).

              • @netjock: Exactly. That's why you never buy individual companies, only index funds. Predicting which companies survive the crisis is like throwing darts at a board. But you can be pretty confident the index as a whole will see you come out ahead in 10 years.

      • If #2 does happen look for another 50% drop from here.

        50% drop, yeah you wish. If a vaccine was found in the next few month, it might skyrocket 50% up.

        • Okay Donald! Even most pharma CEOs are saying 6 - 12 months. June at the soonest Considering the pace of infection spread US lock down is not far away. European lock down is not off the table for Australia. link

          You think I don't have money in this market? But it is the reality of the situation. No point sugar coating it.

          What is absurd is probably not the market but the ability of people to hoard toilet paper. There must be people with 5 year supplies and they keep on buying.

        • 50% drop, yeah you wish. If a vaccine was found in the next few month, it might skyrocket 50% up.

          15th March 23,185 DJIA on 13th March. Let's see. At 20k now. 8k pts to go.

          • @netjock: My assumption was that you thought the drop would be 50% additional to current decline as at 13 Mar.

            • @No ONE: 15th was the Sunday so we take the Friday close. 11,592 is about half. At 20k now means about 8k points to go.

              • @netjock: Fri 13Mar close ASX200: $5,394

                $4,855 (10% drop)
                $4,315 (20% drop)
                $3,776 (30% drop)
                $3,236 (40% drop)
                $2,697 (50% drop)

                Looks like we are arguing about two seperate things.

                • @No ONE: 3236 and you're down to GFC levels. Don't expect it not to. This is a horrible panic because of a disease.

                  You shouldn't put a dollar sign in front of the index as you can't actually buy the index at that price. Check IOZ.

    • +8 votes

      No one is arguing with your thesis that now might be a good time to buy. That's your call and you may be right. The issue is that you're thinking of buying on margin. If you were a seasoned investor then maybe at some point in the next few months you would consider doing that. But you're not (or you wouldn't be asking the question), and so this is a BAD idea.

      If you think it's a good idea to buy, buy using your own money.

      • I must admit I am confused by your comment. How did you form the view that I'm looking to obtain a margin loan?

        What I'm suggesting is that I would borrow say $200k or $300k against my principle place of residence. This amount represents a small percentage of the equity in my home.

        I've borrowed to make investments in the past on a number of occasions. I wouldn't say that I'm a seasoned investor by any stretch of the imagination… however I've never borrowed on margin unless it is protected.

        • It is margin loan with a different security. Whether margin loan or home loan. If you lose your job then it would be harder to service.

        • If you think you can keep your job then a loan secured by your house is not subject to margin calls and definitely the way to go for financing share purchases. Especially as interest rates are so low.

          • @meumax: You can still get a margin call on your property FYI. Rare, but possible.

            • @zeomega: True @zeomega it's in the fine print of most mortgages. In practice though, unlikely to ever be exercised.

              Even in Ireland post GFC, banks preferred to maintain the fantasy that their mortgages were only slightly impaired than try to call them in and find out they were actually worthless because the owners were unable to pay up and then have to sell a flood of re-possessed property at fire sale prices potentially sparking further price falls.

              "Extend and pretend" will be the order of the day. Everything to protect the banks. The government will be 100% behind them. Society will be 100% behind them (socially unacceptable to see home owners thrown onto the streets).

    • This is a (profanity) internet bargaining forum, do most people here have the financial knowledge and qualifications about buying and selling monetary assets and churning out loans from banks? No, so don't post a discussion thread here claiming that "I told you so" about people backing out of their investment decisions, because most people here don't know anything.

    • The current market is called a 'dropping knife'. No one knows where the bottom could be, if you try to catch it, you will most likely get cut. When it recovers, from the dip that would most likely have not reached, it could take another 1-5 years. You would be paying interest on that for 5 years.

  • Try checking the comparison websites for details of margin lending rates

  • A) I duno, maybe not one of the big 4 but something smaller
    B) Up to you

  • Buy the machinery and materials to produce hand sanitizer, gloves or masks, get operational end of april, appeal to investors and raise capital, then liquidate the company come december 2020.

  • Leverage $300k, you are aware that you can lose 10X that in a day?

  • As Warren Buffet likes to say "be fearful when others are greedy and to be greedy only when others are fearful".

    Have a look at a line of credit and ask your bank if they offer this and at what rate. We use this facility to invest in shares/ETFs.

    Just make sure you remember shares/ETFs are long term investment and you have the means to service your investment loan.

  • Crazy market down 8% then ended 4% up

  • This is the perfect recipe to losing your property.

    • Why though? A mortgage is never subject to margin call. As long as OP can keep making repayments, his stocks could tank 60% in the next year and the bank wouldn't care. OP says they're in for 10-15 years. If fully expect the shares to be worth way more than they are now in 10-15 years.

      • There's always outside factors, it's never just that simple.

        I tried to refinance 6 months ago for a better rate. The bank appraisal said property prices had dropped 25% lower than what i paid in 2012 (i live in a Perth suburb).

        I literally cannot move my mortgage elsewhere, because of market factors I won't meet LVR requirements. I'm stuck paying whatever my old bank decides to set it's interest rate and terms at.

        I'm not in a tough spot by any means, I sold off 2/3 of my portfolio in February, purely on the argument of pay off my house and be 'free' versus the chances of watching the markets keep marching north to a S&P500 index value of 5,000. I'm hoping my refinance get's approved now that LVR can't be an issue heh

    • I don't think so, as it is almost fully paid off. Other investment properties have loans against them, so I cannot use them instead.

      I could go and see a financial adviser and a broker… but I'd rather do it the good old fashioned ozbargain way. The DIY way! Hence my questions on this forum.

  • looks like some one has turn the panic button on of planet earth ……

  • i use nab equity builder but you get better rates from your home loan if you do debt recycling and have equity. invest what you can afford to lose.

  • A couple of questions have you got experienced with shares/etfs? Did you go through the GFC and see your shares halve in value? If you answer yes 2 both questions then I would say this isn't a terrible idea as long as you have a good equity base, regular income and don't stretch yourself too far. If you answer no then probably best not too leverage as stomaching the volatility of the stock market for newbies can be overwhelming. For debt recyling AMP Master limit seems to be the go. If you stick with just buying regular index ETFs the dividend itself should cover the interest and the market will eventually recover.

    • Right now I don't own too many shares (less than $200k) and no ETFs. I did lose a fairly large amount in 2008. That was certainly a learning experience, in understanding that managed funds don't always work. However I knew exactly what I was getting into. I was prepared to potentially lose it all, and I did.

      With all due respect, my original question wasn't about getting people's opinions on whether or not this is a good idea. Maybe it is, maybe it isn't.

      Instead, I was looking for factual advice on:
      a) the most cost effective bank loan.
      b) whether or not I should look at setting up a company trust.

      • If you are borrowing money in your name then it makes no sense to set up a trust. You need to buy shares in your name using the borrowed funds so you can claim interest deductions.

  • Mate. Just pre-flop all in.

    It's pretty much your chances but you don't have to drag it out over a few years.

    • The OP should not trade CFDs if he is asking the above question. You may be likely to lose more than the equity you put in.

      E.g. you buy $50,000 worth of shares on 10% margin, meaning you only need $5000. The shares drop by 20%, you will get margin called and now you are down $10000 (you lost your original $5000 and now you owe another $5000 ontop).

      You should not play that game unless you have properly educated yourself.

      • I'm not sure that anyone should really be trading CFDs unless they can demonstrate that they have significant assets. lol

        It's a sad state of affairs, in my view.

  • People being very cautious
    As an example, if you buy cba at say $50 for simplicity, then goes up in 2-3 years to the recent high, I’m not sure what the risk is.
    Historically shares go up and down.

    Happy to hear anyone’s opinion as I don’t know much about it at all

    • Here's an example

      "Citigroup lost $32 billion in 2008. To stay alive, the company had to create equity, and create equity fast. That means creating shares at a time when the stock price had fallen by over 80%, so that the existing shareholders would have to share the wealth with new partners that were entering at once in a lifetime prices, diluting the existing owners substantially.

      By the time the financial crisis was over and the final results tallied, almost six new shares got created for every share that had previously been in existence. A share count that had hovered around 500 million grew to 2.8 billion. Things got so bad that Citigroup had to do a 10-for-1 reverse stock split to superficially paper over their own folly; without taking into account dividends, Citigroup’s stock price will have to increase to $500 per share for the old investors to breakeven

      Profits will have to increase ten-fold for Citigroup shareholers to get back to where they were in 2007—in other words, you’re looking at a situation where investors will have to wait until 2037 to get back to where they were in 2007. That’s failure."

      • That's why you don't buy individual shares cos it's like throwing darts at a dartboard.

        OP says he wants to buy ETFs which track broad markets. That to me is a sound plan. In 10-15 years the market as a whole is likely to be higher than today. Can't say the same for any given individual stock.

      • honestly, that is not a very good example.

        i had the perfect example of CBA.
        solid banking share that is, lets be honest, more than likely to go back up to what it was.

        there are plenty of other aussie shares like any of the big 4 banks, rio, woolworths, wesfarmers to name a few…

        would it be wrong for me to say that you will make a profit on these in the long term?