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In the past year lets say my house increased 100k in value. I have a 2% interest rate on my house. If I took out a mortgage at ~2% to liquidate that 100k in equity and put the money into a Crypto Stable coin like USDC. USDC earns 9% interest and I can get the interest payment either bi-weekly or monthly. I take that interest payment and apply it pay down the new loan (ill build equity on that), it would actually be enough to pay down the loan in full plus a few hundred on mortgage each month.
Obviously there might be a risk with USDC (more DD needed), but has anyone done something like this? I feel like this genius financial decison.
In the past year lets say my house increased 100k in value. I have a 2% interest rate on my house. If I took out a mortgage at ~2% to liquidate that 100k in equity and put the money into a Crypto Stable coin like USDC. USDC earns 9% interest and I can get the interest payment either bi-weekly or monthly. I take that interest payment and apply it pay down the new loan (ill build equity on that), it would actually be enough to pay down the loan in full plus a few hundred on mortgage each month.
Obviously there might be a risk with USDC (more DD needed), but has anyone done something like this? I feel like this genius financial decison.
These are not even regulated yet. It is still very risky...
In the past year lets say my house increased 100k in value. I have a 2% interest rate on my house. If I took out a mortgage at ~2% to liquidate that 100k in equity and put the money into a Crypto Stable coin like USDC. USDC earns 9% interest and I can get the interest payment either bi-weekly or monthly. I take that interest payment and apply it pay down the new loan (ill build equity on that), it would actually be enough to pay down the loan in full plus a few hundred on mortgage each month.
Obviously there might be a risk with USDC (more DD needed), but has anyone done something like this? I feel like this genius financial decison.
Leverage can absolutely can magnify investment returns. Conversely, it can magnify losses, and given your underlying source of capital, it could mean the loss of your home. I have never done anything like this.
We acquired a property last year that I believe was way below market value, in part because it needed some big updates.
Originally, we were considering liquidating some investments to pay for the remodel. However, since it's appraised for $1MM+ more (as is) than we paid for it, and rates had dropped, we ended up going with a cash-out refi (at the same low 30-year fixed rate as the initial mortgage) to pull out several hundred thousand of equity instead of selling off our brokerage holdings.
In the past year lets say my house increased 100k in value. I have a 2% interest rate on my house. If I took out a mortgage at ~2% to liquidate that 100k in equity and put the money into a Crypto Stable coin like USDC. USDC earns 9% interest and I can get the interest payment either bi-weekly or monthly. I take that interest payment and apply it pay down the new loan (ill build equity on that), it would actually be enough to pay down the loan in full plus a few hundred on mortgage each month.
Obviously there might be a risk with USDC (more DD needed), but has anyone done something like this? I feel like this genius financial decison.
They have coined a word for people who take out large mortgages on their home and use the proceeds to invest in high risk business ventures. They're called "homeless".
Cons --
HELOC Interest Rates may be higher than the 2% that you stated.
Actual Available Equity may depend on an Appraisal, ordered by the Lender.
This Appraisal may be performed by an out-of-the area Appraiser who doesn't know your Market.
The Bank may call in your HELOC Money if Interest Rates move higher, which is the only direction left.
Bitcoin is a volatile, unregulated Asset, which may be subject to wild swings in value in the short term.
If your HELOC is called at an inopportune time......you may find yourself in a bad spot.
The concept works in theory, but in practice there are many potential pitfalls.
IF you can afford to repay the loan even if you make nothing on the investments, then it won't be a catastrophe and is worth exploring, otherwise, it's a very bad idea!
You could lose money on the investment even if you get the interest/dividends. That may not be awful if you can hold until it recovers. I'd rather invest in a mix of several high yield securities for diversification, that have a good track record of payouts even in recessions and during covid. Long term, these should perform okay even if there are fluctuations or declines in value.
I could have paid cash for my home, for instance, but took a mortgage. A mortgage costs me about 3%, whereas my portfolio returns more than 16% annually (I live off the dividends without selling any shares), so I have a net gain of 13%.
Translation: "I want to carry a bigger mortgage at dirt cheap mortgage rates so I have more cash to invest"
Sure, not an issue but if you are going to do that I wouldn't do it with a crypto..I would just put it in the normal stock market. It's no different than if you want invest in niche assets like fine art. Regardless of where you stick your investment, people should stick to things they have expertise in
Location: East of Seattle since 1992, 615' Elevation, Zone 8b - originally from SF Bay Area
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Even if not so risky, I would stick with the home equity. Of course it may not continue to grow at the same rate, but that equity is there and available if you need it in some future catastrophic need, such as a new roof, getting laid off, or a major illness.
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