Mortgage + Lombard does not work, why? : eupersonalfinance

by akoloy

I’m planning to purchase a home to reside in and am contemplating my choices. I perceive that it may not be one of the best funding (at the least right here in Germany) but it surely’s a way of life alternative. I got here throughout Lambard loans and I assumed this might be good – use the very fact I’ve vital financial savings in ETFs as collateral and never promote them to get money. However, the rates of interest on Lombard loans are 2+% right here which shocked me – in my thoughts I may go together with very low LTV reminiscent of 25% on an all world ETF, certainly that is fairly protected for the dealer (fairly unlikely to drop to 1/4 of the worth..) so rates of interest must be low for this?

In element, think about this hypothetical state of affairs (spherical numbers only for examples). I wish to purchase a 1M home, have 250k money and 750k ETF all world.

Option 1: neglect about my ETFs, take a 750k mortgage – this appears to be the usual choice with comparatively low curiosity, however I borrow plenty of cash.

Option 2: promote some ETFs and borrow much less cash – not supreme as I misplaced my investments (+must pay capital features tax) that are anticipated to supply me with extra returns than the rate of interest in choice 1.

Option 3: take a Lombard mortgage with say 33% LTV so I pay 500k money and borrow solely 500k so the curiosity is even decrease on the mortgage than choice 1. Turns out dangerous as a result of the Lombard mortgage has excessive rates of interest.

Based on this, choice 1 appears finest however I’d assume that choice 3 must be – in spite of everything you present extra collateral than earlier than however one way or the other this comes at a better worth!? Am I lacking one thing, is there a manner for my ETFs to work for me?

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