Re:How housing became the world’s biggest asset class
by User23 on Wednesday January 22, 2020 @12:31PM
(#22119792)
You can get margin rates as low as a mortgage or even substantially lower[1]. If you don't want to switch brokers you can also ask your current broker for a discounted margin rate. I've heard anywhere from $250k to $1m total assets is enough for them to consider discounts. However, margin calls are a lot more terrifying than foreclosure proceedings, that's for sure. As such, it's virtually imperative to appropriately hedge and that should be factored into the cost of borrowing.
Re:How housing became the world’s biggest asset class
by asdfasgasdgasdg on Wednesday January 22, 2020 @02:04PM
(#22120811)
I was unaware that IB's rates are so low. From reading about it, it looks like they make the money back on other fees, including inactivity fees and commissions. So the real rate is not really as low as what it says, although I suppose on large accounts those fixed fees would make up only a small fraction of the total value. Either way, I was wrong about there being "no" options with interest terms as favorable as mortgages. There is plainly at least one. Your point about hedging is well-taken, also.
Re:How housing became the world’s biggest asset class
by jdashg on Wednesday January 22, 2020 @02:31PM
(#22121120)
Margin calls are the primary difference. (InteractiveBrokers and Robinhood have pretty good margin rates: <=3.05% and ~5% respectively)
Being forced to sell at during a temporary low is the major threat, whereas most people who kept their house during 2008-2009 are doing fine today.
Re:How housing became the world’s biggest asset class
by refurb on Wednesday January 22, 2020 @08:37PM
(#22124021)
That's true for the US market, but what I learned is a "margin call" is a potential scenario in Canada.
Unlike the US, mortgages typically have 5 year terms (can range from 1 to 10). The amortization period is still 25 years (on average), but you refinance every 5 years.
If you put 20% down on a house, which then loses 10% of it's value, you can't refinance without coughing up enough cash to have the loan be 80% of the appraisal.
As you said, at least in the US you can choose to ride out a crash if you have a 30 year fixed mortgage.
Re:How housing became the world’s biggest asset class
by astura on Thursday January 23, 2020 @08:35AM
(#22127378)
During the housing crisis in the US a lot of mortgages were ARMs, which are basically the same thing as your describing.
https://www.cbsnews.com/news/adjustable-rate-mortgages-make-...
Not really. There are no margin accounts with terms as favorable as the typical mortgage loans. (Some examples of terms mortgages have that margin loans don't: the absence of margin calls, the low interest rates, the relative diversity and transparency of rates from potential lenders, etc.)