Mortgage liquidity

[sofa24h]

In the event of one having large amounts of money in stock, would it be possible to calculate the stock into the required amount 20% I would need to provide to get the mortgage without having to sell them. E.g provide them as frozen assets. I would assume if this is possible that in the case they fall below a certain value one would need to provide more liquidity. I know with viac this is partly possible?

Or in the case of gold. Let’s say I’d have large amounts of gold, would I be able to put those up for the 20% amount I’d have to provide? The bank would then get the gold or it would be sealed in a box that both the bank and the client have access to.

Having 20% cash somewhere locked away is somehow not that nice. I’d rather have in in very save stocks or gold (that moves with inflation)

 

[growth_17]

@sofa24h yes, but you need to have a significant portfolio size, at least with UBS you have to be a HNW client, meaning 1.5M CHF+ portfolio.

housing follows inflation, and I sleep safe & sound owning our primary home.

 

[kapp]

@growth_17 Is your home paid off?

 

[growth_17]

@kapp No, that would make zero sense.

 

[kapp]

@growth_17 As an economist yes I agree. But the way you phrased it it sounded like you own your home.

How do you think about your house getting taken from you if the bank thought that the value decreased too much to sustain the mortgage?

 

[growth_17]

@kapp I own it. What was the source of the purchase price is immaterial.
Same as the margin at my broker.

I live in an area that is very unlikely to ever go down.

 

[kapp]

@growth_17 Happy for you man. Reason I am asking because I will be the first person in my extended family to ever buy a house soon in a quite desirable part of Switzerland. And despite being happy that we can afford it, I am also quite scared of the high debt burden.

 

[growth_17]

@kapp Sounds to me like you're in a good spot! I'm a first generation immigrant. I was a bit scared too

Define high debt burden? As in total nominal value of the debt? That's irrelevant, don't sweat it. You'll never need to pay it back.

We paid in more than 20%, and we need to get to 35% in less than 10y so I'm not worried.

 

[kapp]

@growth_17 Yes, total nominal debt. We put 21% down and pledged another 6% of 3a pillar assets. So essentially we will need to amortize another 6-7% over the next 15 years, which should be easily done.

Do you have other meaningful liquid assets which lets you sleep relaxed?

 

[growth_17]

@kapp Yes, I have an investment portfolio that I could touch if push comes to shove.

I mean the bank wouldn't let you have the loan if you were completely without assets once getting the mortgage

 

[cy26629]

@growth_17 Why?

 

[growth_17]

@cy26629 Because the interest rate is much lower than MMF/portfolio returns, thus you'd actually lose money paying it off.

 

[cy26629]

@growth_17 Is it really much lower than returns with very low risk?

 

[growth_17]

@cy26629 2% mortgage interest rate vs 8% average return, compounded over 10 years

200k paid for interest if you borrow the 1M
1.159M profit if you invest the 1M (which you can't if you pay it to the bank).

even at 4% compounded over 10y would be 480k profit.

 

[warner6888]

@sofa24h Are you talking about Lombard loans? https://www.moneyland.ch/en/swiss-lombard-loans-trading-compared

 

[mandofett]

@sofa24h If you have a portfolio margin account with your broker and your assets are diversified and not very volatile then you can get a margin loan against your assets but you’ll have to pay interest on the negative CASH position you will have once you withdraw the money. IBKR asks for something like 3% interest on short CHF.

For lower rates you’ll need to sell a box spread on SMI for the exact amount of CHF you want to pull out of your brokerage account. But that brings new headaches because of the not that great Bid/Ask for box spreads on SMI.

Last time I sold those to borrow CHF I got a rate of 1.89% but nowadays you could get maybe something slightly lower.

BE VERY CAREFUL WITH SHORTING BOX SPREADS.

https://forum.mustachianpost.com/t/spx-box-spreads-for-cheap-margin/8350/4

 

[stevensloan]

@mandofett How do you do that exactly e.g. on IBKR?

 

[mandofett]

@stevensloan You go to SMI, option chain, chose the expiration and the strikes (depending on your spread & liquidity needs) do the math and sell the box.

Please don’t do it if you have never done it before, if you get a bad fill you’re fucked.

You need portfolio margin account for this and if you lose that status because your shares are taking a hit then you might be demoted to reg t margin, that will end up in an instant liquidation at IBKR and you will be in a world of pain

 

[stevensloan]

@mandofett Thanks. Yes I have portfolio margin and already experience with margin trading and leverage. But never sold box spreads. Probably not worth the risk for few bps. Btw if its true as in the forum mentioned that you cant deduct the interest from box spreads from margin it might be even less advantageous compared to regular mortgage

 

[mandofett]

@stevensloan I only use them because I do carry trades: I sell SMI box to borrow CHF, exchange to USD, buy SPX box or T-Bills to lend the money to Janet Yellen at 3% or more. I kinda limit my CHF currency risk because I’m paid in CHF and USD risk is acceptable as I trade a lot on the US markets using USD, so USD to CHF exchange rate is always an issue