mortgage 'top up' options to fund stock or property investment

I have about 170k left to pay on a house valued at 350k. 17 yrs to go. Wondering about options this might give me to fund an investment of about 100k. A lot of questions seem to follow that deviate a bit from the title but heck here goes...


* With these figures can I get a mortgage top up of 100k 'without strings'? For example, use it to buy into a property fund or even a bunch of shares vs a direct property investment.

* Could I take the top up as an interest only?

* The interest costs can be offset against the capital gain?

* In the interim while I'm tooling around with some spare cash in my current a/c (sad but true) and wondering how to invest might it make sense to pop it into the mortgage and subsequently take it back in the form of a topup? Belatedly I'm thinking the answer here is a resounding yes!

rgds
Mike

Hi miket

Yes, you should be able to remortgage for €100k to invest in shares or a property fund. You should use the opportunity to shop around for the cheapest mortgage and not necessarily just stick with your current provider.

You should go for interest only, if it is backed by readily realisable investments. You are borrowing at 3% to invest in a product with an uncertain, but expected postive return. If the security of your salary allows you to take this risk, go for it.

Unfortunately, you will not be able to set the interest costs against the income or capital gains from any shares or unit funds. That is one of the advantages of investing in property, you can set the interest paid against the interest received.

There are some geared funds. They buy property within the fund and borrow within the fund. So the fund gets tax relief on the interest paid. I don't think that the higher interest charges and high annual management charges, and initial charges justify this.

In general if you have cash lying around, you should pay off your mortgage. But if you just about to invest, I would not bother.

Brendan

Just to state the obvious - if the investment goes bad, you may well be putting your family home at risk for the purposes of an investment. While the risk of this disastrous outcome may be small, it isn't a zero factor.

Thanks to all for helpful replys.
To come back on one point made by Brendan "You should use the opportunity to shop around for the cheapest mortgage and not necessarily just stick with your current provider"
Do I actually have a choice in this particular case (ie a re-mortgage) - surely you can't have two parties with an 'interest' in the same property?
Mike

I'd imagine Brendan means that you should consider moving the entire mortgage to a different lender, if the rate is better than your current one? (see best buys)

I had been under the impression that banks were unwilling to lend to individuals to invest in stocks, but I guess if you remortage, the debt is secured against property rather than the stocks, and this is why they will allow people to remortage to invest as opposed to using a personal loan?

Brendan

I'll get my brown nosing bit in first.......



Great site, my best financial discovery ever !!



There is one point I would like to ask you about.



If interest rates were to start increasing and stock market returns to decrease, could you not be in position were the investment would not cover the loan?


Can I assume that you would only advocate this if you were in for the long term? 10+ years.......

Mikeit,
I would not under any circumstances increase my mortgage to buy shares. The individual investor with a regular job and committments simply does not have the expertise to operate successfully in the stock market. I went down the road you are proposing some years ago and am now left with the increased mortgage and left than half the value of the original mortgage top
in shares. At most invest the 100 K in a mixture of assets which have a range of risk from nil to high e.g. 20 K with Rabobank,30 K in bonds , 30 K in property
20 K in shares.

Gobnett said:

Mikeit,
At most invest the 100 K in a mixture of assets which have a range of risk from nil to high e.g. 20 K with Rabobank,30 K in bonds , 30 K in property
20 K in shares.

Click to expand...

Investing in a mix is worth considering but putting the 20K in Rabobank is not much use, you'd be better off only borrowing 80K and considering the rest of the asset mix.

Ulster Bank expressly forbid top-ups being used for stock market speculation. I'd imagine others do too.

Just discovered that my bank, BOI, will not sanction the top-up component as an intersest-only as "it is secured on my PPR". Kind of scuppers things. Wonder do the other banks have the same view?

Bank of Scotland do interest only loans on PPR'S. Max they will give you is 80% LTV as far as I know but you would need to check that % out.