Hi

Unfortunately my calculations for buying a land and build didn't quite add up with my liquid means.

However, at least I found out how much extra mortgage I could take up on my current place (a six digit number). This got me thinking about taking out the extra mortgage and invest it.

What is the EF wisdom around this topic?

Wasn’t the whole Sub-prime mortgage in large part due to people borrowing money on their properties beyond their means of repayment?

Does the tax deductibility of your mortgage figure in your financing viability decision?

If so, take a look at post 3 in this thread:
https://www.englishforum.ch/housing-...den-costs.html

Waiing to change mortgage strategies until the details are known might be prudent.

You'll probably won't hear any of us, but don't. Just don't.

Never invest (or gamble) what you can't afford to lose...

It's a no from me aswell.

By 'invest' what do you mean exactly? Shares? Other properties?

Thanks for all the opinions. I will surely give this another thought. The truth is that this 6 digit figure could bring me 4-5 years closer to financial independence.

Well, my thinking was, that if I increase my mortgage now back to 80%, I am in the situation as if I was buying my apartment right now (instead of 6 years ago) AND having 15% of the property value as an additional investment portfolio.

Why wouldn't I, there is a reason I asked here.

Well, actually worst case scenario I could afford to loose it. Should the property prices drop and the bank make a margin call, I could easily reduce my mortgage back to 65% using my 2nd pillar (untouched till now) alone without having to touch my investments at unfavourable stock market conditions.

The way I see it, this is realising the profits of my property investment without actually selling it.

I am thinking about BRK + Fundsmith + Smithson

Mind the currency risk.

What currency risk? If the USD or GBP tumbles the shares are still worth what they were before, just a few more in dollars or pounds.

I have done this, but it will all depend on your specific financial circumstances so difficult for anyone on here to advise one way or the other.

In general I would suggest that if you:
1) can afford to repay the mortgage even if you take a -40% bath on the investments you make (ie a repeat of 2008 crisis);
2) have a long-term time horizon until you are looking to retire and therefore have time to wait out any drawdowns in the investments; and
3) are not taking too much leverage on your overall portfolio

then it is probably worthwhile.

I would make the most of the low long-term fixed mortgage interest rates available at the moment and fix for 10 years. As you get closer to the end of the fix you should then re-evaluate the investments you have made vs where interest rates are at that point to decide whether to take the risk of continuing to hold higher-risk investments (and keeping the mortgage) or whether to start cashing in ready to repay the mortgage.

Worst case scenario: 2nd pillar if margin call.
15+ years.
I use 0 leverage in my investment portfolio. Unless you consider the property investment itself, which would be 5x.

i always do the following thought experiments. assuming i have a 10 year fixed rate mortgage (say 1%), would i be willing to extend that mortgage if:

- the money was invested into a 10 year US treasury bond yielding 3% (i.e. have mainly FX risk)?
- how would i react if instead of the treasury bond, i invested it in 'Crappy Fund' which subsequently loses 50% of value in first 2 years and doesn't have a bright outlook?

Biggest issue is the cash call on the mortgage will happen at a time when equities are down 50%. I don't gear anything, then very little can go wrong as you won't be a forced seller. Swiss property could easily fall 50%, just knocking off the ZIRP premium from the last 10 years. I remember when post finance paid 2.5% interest & it's not so long ago.

see above: In that case I would use our 2nd pillar instead of selling at a loss.

Yes but the second pillar would significantly drop in value in the scenario I am talking about. If there was no cash call I would say yes, but due to potential cash call then no.

Out of interest how did your other investments perform v Fundsmith?
My wife's financial advisor said 100% FS was too risky for her pension fund so went 25% FS which is up 23.4% in i8 months he chose LF Woodford for 25%, thats down 15.2% & other crap. His picks are down on average based on cash weightings. FS is also the best performer..... . About to be transferred to Hargreaves Lansdown....

And when everybody and their dog has been asked for cash to maintain the LTV around the same time?

what is your 2nd pillar invested in?

Worth the same in USD but not in CHF, the currency your mortgage is denominated in.

Indeed. But swiss PFs are quite defensive, which means the hit would not be as bad as e.g. on the property market.

So far I have about the same avg yearly return with BRK as with FS. FEET is down like all emerging markets. Other than that I have shares of my employer, which didn't grow much, but I get a significant discount on purchase and a ~3% dividend which combined still make it a good investment for the 4 year holding period.

Caught me there: as all PFs, mostly swiss stock, bonds and swiss real estate

But I have my 2nd pillar in CHF as a hedge. For the rest of my investments I don't care much, as who knows where I will retire.

Yes & no, if the economy takes a hit those Swiss assets could significantly fall in value.