Refinancing home: you borrow on the mortgage loan of your house to finance investments. Even if this practice remains unknown for a lot of people, it could be potentially lucrative in the long term.
But refinancing home could also be a little dangerous… At the possibility of great rewards, you must add the possibility of a disaster for those who are not adequately prepared to face the risks to loose their home.
Invest Refinancing your Mortgage: How it Works?
The leverage effect when refinancing home to invest reflects the belief that, in the long term, a diversified portfolio of shares exceeds the cost of borrowing on your home mortgage.
This could be a good move since the interest costs are tax deductible. This could be a good added value!
Let’s take an example of this strategy to invest $150 000 over 25 years: it could increase the net value after tax of more than $75 000 when compared with the simple payment of the home mortgage loan…
Borrow on your home mortgage loan is not for those who struggle to make their monthly mortgage payments. Having a stable income with consistent cash flow is the key if you invest after refinancing home. With stock prices that are growing in the long term, statistically, fixed term buying stay the best option to invest.
So, is refinancing your home to get a new mortgage loan in order to invest a good idea? Maybe… But less than one fourth of homeowners chooses refinancing and borrows with the equity of their home. They primarily refinance to finance home improvements or purchase a second home.
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