Calling it quits!

thanks to all millionaires for sharing their secrets here with others!!!!!

Firstly, I am very impressed by some of the investment talk in here. I used to work as. Finance professional before I left the workforce to be a sahm. My husband is a legal professional who is working toward that one million dollar salary but is currently at only half that level. I was rather hesitant about spilling my financial details here but would love so much to obtain advice from the multimillionaires, as I aspire towards financial independence but am nowhere there yet. I am in my early thirties and my husband is in his mid thirties. I made a million sgd through property from 2004-2010 but has invested it in a landed property in 2011. I am 60 percent leveraged in this property which is also my primary residence.

Recently the bank from which I had obtained the loan, offered me cash of 1.3m since my property has risen 1m in value over the past two years and it is willing to gear me up to 80 percent. This would be our only loan because we have paid off our student loans and have no other property. My husband makes 500k sgd base salary a year. We have additional 300k in cash.

I am thinking that this 1.3m loan will come in handy in US equities now. I know I am nt very diversified like many of you here, and my investment strategies would be considered very aggressive by most of you as I put heavily in one or two stocks. I do consider a lot - both fundamentally and technically before I put in the buy. Would you recommend I take up this funds into equities? Should I even take up this offer to further leverage my home?

Thank you lots for your replies.

Originally Posted by SAHM

Firstly, I am very impressed by some of the investment talk in here. I used to work as. Finance professional before I left the workforce to be a sahm. My husband is a legal professional who is working toward that one million dollar salary but is currently at only half that level. I was rather hesitant about spilling my financial details here but would love so much to obtain advice from the multimillionaires, as I aspire towards financial independence but am nowhere there yet. I am in my early thirties and my husband is in his mid thirties. I made a million sgd through property from 2004-2010 but has invested it in a landed property in 2011. I am 60 percent leveraged in this property which is also my primary residence.

Recently the bank from which I had obtained the loan, offered me cash of 1.3m since my property has risen 1m in value over the past two years and it is willing to gear me up to 80 percent. This would be our only loan because we have paid off our student loans and have no other property. My husband makes 500k sgd base salary a year. We have additional 300k in cash.

I am thinking that this 1.3m loan will come in handy in US equities now. I know I am nt very diversified like many of you here, and my investment strategies would be considered very aggressive by most of you as I put heavily in one or two stocks. I do consider a lot - both fundamentally and technically before I put in the buy. Would you recommend I take up this funds into equities? Should I even take up this offer to further leverage my home?

Thank you lots for your replies.

I wanted to add that the reason we only have 300k in cash right now when my husband is making 500k is that we recently bought a property overseas paid up in cash for my mother-in-law to live in. That's not a property we can sell at will and it's solely for consumption so I will leave it out of the equation. My husband also recently got to this salary. His earnings had risen steadily from 250k through 400k the past years. His 500k salary would stay for the next years unless he makes a breakthrough in his career and gets the million dollar package. I wouldnt bank on that for our financial independence plan though.

Originally Posted by SAHM

Recently the bank from which I had obtained the loan, offered me cash of 1.3m since my property has risen 1m in value over the past two years and it is willing to gear me up to 80 percent. This would be our only loan because we have paid off our student loans and have no other property. My husband makes 500k sgd base salary a year. We have additional 300k in cash.

I am thinking that this 1.3m loan will come in handy in US equities now. I know I am nt very diversified like many of you here, and my investment strategies would be considered very aggressive by most of you as I put heavily in one or two stocks. I do consider a lot - both fundamentally and technically before I put in the buy. Would you recommend I take up this funds into equities? Should I even take up this offer to further leverage my home?

Thank you lots for your replies.

As a former finance professional, you should be able to make your own judgement on investing, but my view is that you have to prepare for an interest rate rise, while considering that although the US economy is recovering, the market is at a high. US Bank stocks are still low on valuations, but you have to consider the impact of new regulations like Basel III (long-term) and lawsuits (medium-term) on their future profitability. Generally banks make more money if long rates rise first because of higher net interest margins i.e., they borrow short-end (deposits) and make longer-term loans. Volatility will be high as various interests try to claw back losses from the global financial crisis. If you want to plunge in, European stocks are at even more distressed valuations.

Given your age and your husband's stable job and salary, I don't think there is any issue gearing the house to 80%, but consider whether you want to compound the risk by buying higher risk stocks, taking currency risk and leverage all at the same time. You can mitigate the currency risk, by buying US stocks with borrowed US dollars rather than Singapore dollars. You don't have to lever to 80% by taking a $600K loan rather than a $1.3K loan. Lastly shop around for the best interest rates and play banks against each other. Many of us can borrow at less than 1% for funds secured on properties. Sounds like you should sign up with a private bank.

Don't be stupid. Don't take the loan. What you should be doing is to pay down your mortgage as fast as possible. You could also downgrade to a cheaper property and pay off the mortgage and live in a fully paid home. Don't be too happy with your hubby's salary. He can be retrenched anytime and you will go from $500k pa to zero. He can also lose his ability to work to due ill health, accident or even die. Life is unpredictable. You have made money from your property investment, what you need to do is build up your cash reserve for rainy days. If you take the loan, and then we hit a crisis and your hubby lose his job, and the property market crash, you can lose everything and will be begging on the streets. Don't act tough. Sorry for being harsh, but I care, especially since not many people in this forum understand finance and investments.

Originally Posted by SAHM

Firstly, I am very impressed by some of the investment talk in here. I used to work as. Finance professional before I left the workforce to be a sahm. My husband is a legal professional who is working toward that one million dollar salary but is currently at only half that level. I was rather hesitant about spilling my financial details here but would love so much to obtain advice from the multimillionaires, as I aspire towards financial independence but am nowhere there yet. I am in my early thirties and my husband is in his mid thirties. I made a million sgd through property from 2004-2010 but has invested it in a landed property in 2011. I am 60 percent leveraged in this property which is also my primary residence.

Recently the bank from which I had obtained the loan, offered me cash of 1.3m since my property has risen 1m in value over the past two years and it is willing to gear me up to 80 percent. This would be our only loan because we have paid off our student loans and have no other property. My husband makes 500k sgd base salary a year. We have additional 300k in cash.

I am thinking that this 1.3m loan will come in handy in US equities now. I know I am nt very diversified like many of you here, and my investment strategies would be considered very aggressive by most of you as I put heavily in one or two stocks. I do consider a lot - both fundamentally and technically before I put in the buy. Would you recommend I take up this funds into equities? Should I even take up this offer to further leverage my home?

Thank you lots for your replies.

Originally Posted by SAHM

I wanted to add that the reason we only have 300k in cash right now when my husband is making 500k is that we recently bought a property overseas paid up in cash for my mother-in-law to live in. That's not a property we can sell at will and it's solely for consumption so I will leave it out of the equation. My husband also recently got to this salary. His earnings had risen steadily from 250k through 400k the past years. His 500k salary would stay for the next years unless he makes a breakthrough in his career and gets the million dollar package. I wouldnt bank on that for our financial independence plan though.

I would say that it's generally quite hard to break into the $million base salary levels as only a few like the partners earn that much. But $500K base should probably imply about $750K of total compensation. After about $120K of taxes and say $300K of expenses, you are probably left with $300K of savings, so you could pay the loan off in 4+ years, less if his income rises. Should not be an issue.

Originally Posted by Unregistered

Don't be stupid. Don't take the loan. What you should be doing is to pay down your mortgage as fast as possible. You could also downgrade to a cheaper property and pay off the mortgage and live in a fully paid home. Don't be too happy with your hubby's salary. He can be retrenched anytime and you will go from $500k pa to zero. He can also lose his ability to work to due ill health, accident or even die. Life is unpredictable. You have made money from your property investment, what you need to do is build up your cash reserve for rainy days. If you take the loan, and then we hit a crisis and your hubby lose his job, and the property market crash, you can lose everything and will be begging on the streets. Don't act tough. Sorry for being harsh, but I care, especially since not many people in this forum understand finance and investments.

For pete's sake, they are in their early 30s and big earners. They can afford to take a little risk and high end lawyers don't typically face the same job insecurity as finance people. Some of the other risks can be mitigated through insurance. Plus they are taking the loan to invest, not to spend.

[whizzard]

Originally Posted by SAHM

Firstly, I am very impressed by some of the investment talk in here. I used to work as. Finance professional before I left the workforce to be a sahm. My husband is a legal professional who is working toward that one million dollar salary but is currently at only half that level. I was rather hesitant about spilling my financial details here but would love so much to obtain advice from the multimillionaires, as I aspire towards financial independence but am nowhere there yet. I am in my early thirties and my husband is in his mid thirties. I made a million sgd through property from 2004-2010 but has invested it in a landed property in 2011. I am 60 percent leveraged in this property which is also my primary residence.

Recently the bank from which I had obtained the loan, offered me cash of 1.3m since my property has risen 1m in value over the past two years and it is willing to gear me up to 80 percent. This would be our only loan because we have paid off our student loans and have no other property. My husband makes 500k sgd base salary a year. We have additional 300k in cash.

I am thinking that this 1.3m loan will come in handy in US equities now. I know I am nt very diversified like many of you here, and my investment strategies would be considered very aggressive by most of you as I put heavily in one or two stocks. I do consider a lot - both fundamentally and technically before I put in the buy. Would you recommend I take up this funds into equities? Should I even take up this offer to further leverage my home?

Thank you lots for your replies.

On the balance of probability, I think you should borrow and invest but keep at least one year's worth of expenses as emergency cash in the bank.

(1) Your husband is in his thirties, hence young and healthy and should be able to sustain his career for a good number of years. Being a lawyer, the job security is much higher say compared to a banker.

(2) Mortgage loan is a cheap loan to use.

(3) You are using the money to invest, not consume.

What is the worst case scenario?

(1) The markets get into another turmoil hence your investments turn sour and the value of your home plunges.

(2) Your husband gets retrenched because of the slow business due to the economic turmoil.

Scenario (1) is to be expected and should that happen, you probably have sufficient buffer to cushion it. Take the loss on your equity investment and consider it a lesson learnt. The bank may make a margin call on mortgage loan (depending on how aggressively you leveraged it). The one year of emergency cash plus your husband's salary ought to be able to stave off this call. In any case, you could always negotiate with the bank to restructure the loan and as long as you can demonstrate the capability to repay, the bank will not foreclose unreasonaly as they are in the business of making loans, not making foreclosures.

What if scenario (2) happens? That would be very tricky for you, being solely dependent upon your husband's income to sustain the family. It would take a very sharp and prolonged economic crisis for scenario (2) to happen. Hence, the highest risk factor appear to be scenario (2). If you are comfortable with the likelihood of this scenario not panning out, go ahead and press the button.

However, always keep at least a year of emergency cash on standby. Yes, this is a drag on returns but consider it as an insurance policy in thesevolatile times that we are living in.

Would I do it if I were in your shoes? Probably yes but with that emergency cash set aside and a lower LTV of 70% instead of 80% for a little more buffer. You have time on your side even if you lose money on your investments and can afford to take such risks.

dont be too sure about lawyers. i've seen lawyers begging for jobs before.

better to be safe than sorry.

Being a sahm can be very dangerous. why? cannot sit still, very itchy, want to do things. so when bank offer home equity loan, become very excited.

Learn from the lessons of the US, people got HEL and went to hell. When the market crash, your home value will crash and your equities investment will crash too. So you have a double whammy. Worst, your hubby will lose his job.

So, dont be itchy. Be prudent. Better for you to spend time on how to cook better and be a better wife.