We all felt the pinch during the financial crisis that began three years ago, including those who lost their homes or saw their property investments diminish. But people have been searching high and low since for investments with good returns and have had difficulty in finding them.
However there are some investments that stood strong throughout the recession, and were barely affected by the financial trouble that most other markets saw. Wine is one of these. It has been reported that wine has done extremely well for almost 15 years, offering great rewards to investors.
The reports have confirmed that various wine types have increased by extortionate amounts over the past 14 years, and has offered much higher returns to its investors that the S&P 500 stock market. So it would appear that many people have been investing in all the wrong places.
The reason for the increase is that eastern countries have been in demand of quality wines, and as we know high demand means high prices can be charged. But this has also meant that it is now expensive to enter into a wine investment in the first place.
This is off-putting to some people, as many don’t have the funds available to make a sizeable investment. But something often overlooked is the ability to remortgage a property. You can borrow more money against your home in the process and use it to invest in the wine markets.
How much extra money you can borrow will really depend on how much equity you’ve got locked away in your property, and how much the lender is willing to lend based on your credit history. Equity is how much of the property is not mortgaged. For example, you may have 30% equity if you have a 100,000 home with a 70,000 mortgage on it. So you could borrow a proportion of the 30,000.
The whole idea of borrowing money to invest means that you will need to be making higher returns on your investment than the interest that your lender is charging on the loan. So if your mortgage interest rate is 5% per annum, you’ll want to be making more than this on your investment to make profit.
If the investment returns are lower than the interest on your loan, you are losing money, but considering that interest rates on mortgages are currently around the 5% mark, this is unlikely but you should beware that it could happen.
Beware that you do need to keep up with your mortgage repayments, so only borrow the extra money if you can afford to do so as failing to meet repayment demands could result in your losing your property altogether.
A mortgage adviser may also be able to assist you in selecting the right mortgage so that you don’t end up paying more or being tied in for longer than you wanted to.
Marcus Selmon writes for Just Commercial Mortgages the UK’s No1 site for the latest commercial mortgage rates and commercial property finance news.
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