As property prices went up since we bought our place and as I only have a 65% mortgage, I now have some room (a six digit figure) to raise my mortgage up to 80% of current value.
My idea was to take this money, invest it long term (talking 15 years). During these 15 years I plan to pay back this extra mortgage via 3a. This way I save about 35% (marginal tax rate) plus the difference between my investment return and the interest rate: long term 7.5% (s&p 500 or VT) - 1% (1.5% for 10 year mortgage - 35% tax saving)…should yield on average 6.5% difference = over 15 years 250% - 100%*0.65 (35 tax saving on 3a) = 180% net profit
One risk that I am aware of is the margin call by the bank if prices drop significantly and my mortgage goes above 80% of the property value. The risk is amplified by the fact that this could happen at a time when stocks are down as well. My hedge against this worst case scenario is my pension fund which has enough withdraw-able part to cover the potential margin call. But I would only withdraw if absolutely necessary.
My thinking with respect to the risk of a margin call is that my risk is still lower than that of someone who buys at today’s prices, since even if stocks do go down I still have at least part of the raised mortgage value (unless stocks go down to 0). My risk is even lower compared to someone who buys at today’s prices and withdraws his pension fund.
So my question is: what you guys think about this idea.
I know people say: don’t invest borrowed money. But isn’t any leveraged investment exactly that? Isn’t buying a house with 80% mortgage an non-diversified investment into the swiss real estate market with 5x leverage using borrowed money?
Thanks for all your opinions,