Joined
·
11 Posts
For centuries banks made money by paying low rates on depoists (affectively they borrow the depositors money) and then they lend it out at higher rates.
With 20 times leverage for example a 1% profit on a loan turns into a sweet20% Return on Equity for the Bank.
Now you can be the Bank!
Interest rates are incredibaly low. Banks will lend on a varaible mortage at 3.3% (lates posted rates) or lock in for five years at 4.1%. My line of credit secured indicates I can borrow at 2.5% (insane!)
Now take that money and invest in a few Bank preferrred shares that pay more than 6% and are eligible for dividend tax credit.
Or find other safe preferred paying higher than that.
Have you just found a money machine? Could be quite worthwhile if you have say 100,000 or better, 300,000 of equity in your house.
Normally the rule is don't borrow to invest. But is this a normal time?
With 20 times leverage for example a 1% profit on a loan turns into a sweet20% Return on Equity for the Bank.
Now you can be the Bank!
Interest rates are incredibaly low. Banks will lend on a varaible mortage at 3.3% (lates posted rates) or lock in for five years at 4.1%. My line of credit secured indicates I can borrow at 2.5% (insane!)
Now take that money and invest in a few Bank preferrred shares that pay more than 6% and are eligible for dividend tax credit.
Or find other safe preferred paying higher than that.
Have you just found a money machine? Could be quite worthwhile if you have say 100,000 or better, 300,000 of equity in your house.
Normally the rule is don't borrow to invest. But is this a normal time?