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Is debt recycling a thing in Ireland?

  • 08-09-2021 4:59pm
    Registered Users Posts: 54 ✭✭

    Let's say your house is fully paid off. It has 200K equity/value.

    What is the local term, if any, for borrowing against that equity to invest in stocks?


  • Registered Users Posts: 3,087 ✭✭✭Static M.e.

    I've never heard of any one doing that here. Is it popular in the States or UK?

  • Registered Users Posts: 33,581 ✭✭✭✭listermint

    Absolutely good luck in finding any legitimate lender giving you money for equity in your house so you can play the stock market. Not a hope.

    One they won't be able to get you out of it. Two why would they give money so you can gamble it

  • Registered Users Posts: 54 ✭✭kujaultima

    It's a common way to invest while also claiming tax deductions on the interest paid, the latter of which is the key benefit.

    I can understand your aversion. But if the money is going into index funds, basically into the stock market as a whole, then the long term risk is minimal.

  • Registered Users Posts: 33,581 ✭✭✭✭listermint

    I don't have an aversion. The banks do. You won't get anyone taking you up on this offer. Long term index or not.

  • Registered Users Posts: 2,251 ✭✭✭massdebater

    It's called a HELOC (home equity line of credit). Not sure if they're available in Ireland but very popular in north america.

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  • Registered Users Posts: 18,059 ✭✭✭✭namloc1980

    No lender that I'm aware of will give you a mortgage to invest in the stock market in Ireland.

  • Moderators, Business & Finance Moderators, Motoring & Transport Moderators, Society & Culture Moderators Posts: 67,529 Mod ✭✭✭✭L1011

    There's no tax deductions on the interest anymore here either.

  • Registered Users Posts: 3,635 ✭✭✭dotsman

    In terms of releasing equity in your home, yes this is a thing, and was very popular prior to the 08 crash (typically to be used to purchase additional property!). However, since then, not as much (typically under strict, very conservative conditions). As for lending to purchase shares? Unfortunately no, Ireland has a terrible attitude to investing in the stock market. I'm not aware of any bank that will do this. Typically, when it comes to lending to purchase shares, it is to purchase shares in a limited company (i.e. to buy further in to a company you already partly own etc).

    Now, you could possibly get around this by releasing equity to purchase something else, and use the money you were going to use for that to purchase shares instead. Alternatively, (and I wouldn't recommend this), but you could possibly release equity for something they are happy with and, as soon as you have the funds, "change your mind" and buy shares instead. However, if would depend on the wording on the loan offer to determine if this could lead to problems. As mentioned, equity release is typically under very strict conditions.

  • Registered Users Posts: 50 ✭✭cyllyn28

    I heard an interesting story recently ...from someone who was one of the smart and ballsy lads who "invested" in Eircom stock.....Someone from their bank, a traditional Irish bank, called them up, and gave them a heart attack amount of money to "invest" in Eircom....They got out okay, when they realised they'd no fff'ing idea what they were doing....But, the clowns at the bank had done a lot of this lending.....So now...Irish banks are more comfortable in financing cocaine binges than stock market adventures.....

  • Registered Users Posts: 183 ✭✭Rket4000

    Yea, but in the USA they'll come and take your house if you don't make the repayments.. Its not so easy for banks to do that here, so no way would they take the risk

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  • Registered Users Posts: 2,251 ✭✭✭massdebater

    That's makes sense, I'm not familiar with the ins and out of the rules. A lot of people keep it in the background as their emergency fund, allowing them to invest all of their cash in hand.

  • Registered Users Posts: 26,034 ✭✭✭✭Peregrinus

    It happens in the US because (a) foreclosing on a mortgage is relatively straightforward in the US, and happens quickly, so the lender's risk is lower, and (b) mortgage interest is tax-deductible. Neither of these conditions prevails in Ireland, making the whole idea much less attractive both to lenders and to borrowers. That, coupled with caution over excessive lending as a result of experience in the 2000s, means that it virtually never happens here.

  • Registered Users Posts: 54 ✭✭kujaultima

    Thanks all for the responses and very much for the detail. It certainly seems like it's not an attractive option here.


  • Moderators, Category Moderators, Arts Moderators, Sports Moderators Posts: 48,244 CMod ✭✭✭✭magicbastarder

    i was once privy to a phone call a colleague got after selling a property, where his bank rang him offering him financial advice on what to do with the money; and i wish i'd been able to hear both sides of the exchange, because he made merry with the fact that the previous time he'd come into money (inheritance), they'd met with him and were quite insistent that the best thing he could do with his money was to put it into bank shares. that was probably 2006 or 2007. thankfully he didn't listen to them.