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Old 30-07-2020, 01:00 AM   #46
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But you are comparing apple to oranges!

Before you can borrow S$150,000 from Interactive Brokers at 1.373%, you must already own probably S$300,000 worth of assets in IB custody, so you can borrow only like 50% of what you owned!

For properties, you only need to own $300,000 to buy a $1.5 Million property and borrow S$1.2 Million at say 1.3% p.a.!

So, in both cases, say you own $300,000, but you can only borrow about S$150,000 from IB to buy stocks but you can borrow $1.2 Millions to buy a property!

Not only that, when the market value of your assets in IB custody drops, you need to top up!
However, when your S$1.5M property price crash, you don't need to top up (as long as you pay your monthly loan installment)!

Borrowing from IB to buy stocks and borrowing to buy property is really comparing earth and heaven!

And oh, your so called "factual observation" is not factual at all!

No, not actually. At this instant, as I write this, if you borrow at least S$150,000 from Interactive Brokers (a lower threshold than most mortgage lenders have) youíll pay only 1.373% interest. And thatís with zero fees ó no valuation, legal, stamp duties, or other fees. Itís a mouse click or finger tap away. Yes, thatís Singapore dollars, for margin to take positions in Singapore dollar denominated securities. And at S$1.5 million or more the interest rate falls to 0.873%. Pretty incredible, isnít it?

Thatís not necessarily a recommendation; itís just a factual observation.
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Last edited by chrisloh65; 30-07-2020 at 01:04 AM..
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Old 30-07-2020, 04:53 AM   #47
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Agree completely. The risk profile and leverage difference is not even worth comparing.

IB does not have margin call, they immediately wipe you out if you fall out of their margin requirements which are subjected to change whenever they wish.

Getting wiped out is very possible in current market conditions with wide market swings, nobody knows if March was the bottom or if there a another plunge lurking months away.

But you are comparing apple to oranges!

Before you can borrow S$150,000 from Interactive Brokers at 1.373%, you must already own probably S$300,000 worth of assets in IB custody, so you can borrow only like 50% of what you owned!

For properties, you only need to own $300,000 to buy a $1.5 Million property and borrow S$1.2 Million at say 1.3% p.a.!

So, in both cases, say you own $300,000, but you can only borrow about S$150,000 from IB to buy stocks but you can borrow $1.2 Millions to buy a property!

Not only that, when the market value of your assets in IB custody drops, you need to top up!
However, when your S$1.5M property price crash, you don't need to top up (as long as you pay your monthly loan installment)!

Borrowing from IB to buy stocks and borrowing to buy property is really comparing earth and heaven!

And oh, your so called "factual observation" is not factual at all!

Last edited by fluxos; 30-07-2020 at 04:57 AM..
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Old 30-07-2020, 07:58 AM   #48
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Agree completely. The risk profile and leverage difference is not even worth comparing.
It’s worth examination, of course. Can you borrow Singapore dollars from a bank at ~1.6% interest to top up your new CPF Retirement Account, repay Ordinary Account funds, or deposit $10,000 ($20,000 per couple) with Singlife, as examples? Or for that matter to post bail for a child or sibling? These ideas are “interesting.” I don’t think I would, but I can definitely see how some people might, with merit.

IB does not have margin call, they immediately wipe you out if you fall out of their margin requirements which are subjected to change whenever they wish.
OK, fair point. You have to keep the collateral at sufficient size and quality.

There are margin calls in direct real estate purchases with mortgages in Singapore. They happened during the Asian Financial Crisis. Moreover, creditors in Singapore have “full recourse,” meaning your liability for the debt is bounded by the debt plus accrued interest and recovery costs, not by the market value of the property. In some other countries your liability for the debt is effectively and/or legally bounded by the property value, except for fraud-related situations (you borrowed but the property didn’t even exist for example). It’s fair to say that Donald Trump is a beneficiary of no or limited recourse loans.

Getting wiped out is very possible in current market conditions with wide market swings, nobody knows if March was the bottom or if there a another plunge lurking months away.
No, that’s not necessarily true. Unless you’re inclined to believe the Government of Singapore will suddenly stop existing or at least stop paying its debts (A35 or T-bills for example), in which case your mortgage and real estate will go pear shaped, too. It is certainly possible to borrow some amount from Interactive Brokers with particular, typically prudent, long-term investment collateral that will be vanishingly unlikely to be liquidated in any amount. You could even do this to increase your bank mortgage leverage from 75% to some higher number. Or take 65% leverage from a bank at a higher interest rate with their high fees then add another 10 percentage points of leverage via IB.

These are ideas about what you could do, not necessarily what you should do. But I have enough imagination to understand how this inexpensive source of credit could be a reasonable, best available tool in certain circumstances. As a low cost, short term bridge loan, for example, it seems really interesting.

Last edited by BBCWatcher; 30-07-2020 at 08:00 AM..
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Old 30-07-2020, 09:44 AM   #49
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Your timing must be very good when buying a property as an investment.

Most of us have only 1 or 2 chances to buy one at the right timing.

If you happen to buy at the peak price, that's it. You cannot average down. And you need longer period to break even.

For stocks, you can always buy in separate tranches.
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Old 30-07-2020, 12:40 PM   #50
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Itís worth examination, of course. Can you borrow Singapore dollars from a bank at ~1.6% interest to top up your new CPF Retirement Account, repay Ordinary Account funds, or deposit $10,000 ($20,000 per couple) with Singlife, as examples? Or for that matter to post bail for a child or sibling? These ideas are ďinteresting.Ē I donít think I would, but I can definitely see how some people might, with merit.


OK, fair point. You have to keep the collateral at sufficient size and quality.

There are margin calls in direct real estate purchases with mortgages in Singapore. They happened during the Asian Financial Crisis. Moreover, creditors in Singapore have ďfull recourse,Ē meaning your liability for the debt is bounded by the debt plus accrued interest and recovery costs, not by the market value of the property. In some other countries your liability for the debt is effectively and/or legally bounded by the property value, except for fraud-related situations (you borrowed but the property didnít even exist for example). Itís fair to say that Donald Trump is a beneficiary of no or limited recourse loans.


No, thatís not necessarily true. Unless youíre inclined to believe the Government of Singapore will suddenly stop existing or at least stop paying its debts (A35 or T-bills for example), in which case your mortgage and real estate will go pear shaped, too. It is certainly possible to borrow some amount from Interactive Brokers with particular, typically prudent, long-term investment collateral that will be vanishingly unlikely to be liquidated in any amount. You could even do this to increase your bank mortgage leverage from 75% to some higher number. Or take 65% leverage from a bank at a higher interest rate with their high fees then add another 10 percentage points of leverage via IB.

These are ideas about what you could do, not necessarily what you should do. But I have enough imagination to understand how this inexpensive source of credit could be a reasonable, best available tool in certain circumstances. As a low cost, short term bridge loan, for example, it seems really interesting.
Sure, 1.6% from IB could be interesting in certain circumstances for some individuals.

For comparison sake, I've leveraged my capital in property 400% my down-payment at a grand interest rate of 0.636% (0.2% spread +3month sibor (0.436%)). There is no asset class in the world that allows that, only property.
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Old 30-07-2020, 01:40 PM   #51
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if you do not understand amortisation, you will be comparing apples to oranges in your analysis about interest rates.

While you think that, wow, mortgage interest so low at 1.x%, did you calculate the different scenarios if you were to sell at different years?
use a simple excel sheet to try, you will be surprised at the real interest if you were to sell at early years...
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Old 30-07-2020, 02:56 PM   #52
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For comparison sake, I've leveraged my capital in property 400% my down-payment at a grand interest rate of 0.636% (0.2% spread +3month sibor (0.436%)). There is no asset class in the world that allows that, only property.
First of all, no, that's just not true. Plonk a stack of 6 month SGS T-bills on the table as collateral and you've got no problem getting a great loan rate. All lenders care about is quality collateral, and they especially love highly liquid high quality collateral (which is not real estate).

Also, the 3 month SIBOR isn't 0.436% any more. I'm looking at current, up-to-the-moment rates, not past rates.

Let's suppose you borrow S$10 million at this instant, as I write this, from Interactive Brokers. There are zero fees to do this, please note. (Except for the lower tier rate brackets if you want to consider that a fee.) Here's what the current interest rate is on S$10 million of margin:

First S$150K: 1.716%
Next S$1.35M: 1.216%
Last S$8.5M: 0.716%

Blended Rate: ~0.799% (if I did my math right)

That's an interest only collateralized loan, please note. There's no requirement to repay principal on any particular schedule. You can defer principal repayment as long as you wish, and as long as you maintain adequate or better collateral. For margin up to S$150 million, as long as you've got the collateral you're good to go, with a mouse click or tablet tap. Which is pretty astonishing, really, but there it is.
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Old 30-07-2020, 02:59 PM   #53
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Sure, 1.6% from IB could be interesting in certain circumstances for some individuals.

For comparison sake, I've leveraged my capital in property 400% my down-payment at a grand interest rate of 0.636% (0.2% spread +3month sibor (0.436%)). There is no asset class in the world that allows that, only property.
So a 20% drop will wipe out your whole investment. What is new?
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Old 30-07-2020, 03:02 PM   #54
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if you do not understand amortisation, you will be comparing apples to oranges in your analysis about interest rates.

While you think that, wow, mortgage interest so low at 1.x%, did you calculate the different scenarios if you were to sell at different years?
use a simple excel sheet to try, you will be surprised at the real interest if you were to sell at early years...
Many people here always think that property will go up indefinitely, no amortisation needed. Once you stay for sometimes, it will get enbloc. Only need to leverage and collect rental.
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Old 30-07-2020, 03:45 PM   #55
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A 20% drop will wipe your leveraged equity investment, not property. That’s the key you need to understand.

IB could potential wipe you out while you're sleeping with margin, with property, not so.

So a 20% drop will wipe out your whole investment. What is new?
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Last edited by fluxos; 30-07-2020 at 04:02 PM..
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Old 30-07-2020, 04:54 PM   #56
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First of all, no, that's just not true. Plonk a stack of 6 month SGS T-bills on the table as collateral and you've got no problem getting a great loan rate. All lenders care about is quality collateral, and they especially love highly liquid high quality collateral (which is not real estate).

Also, the 3 month SIBOR isn't 0.436% any more. I'm looking at current, up-to-the-moment rates, not past rates.

Let's suppose you borrow S$10 million at this instant, as I write this, from Interactive Brokers. There are zero fees to do this, please note. (Except for the lower tier rate brackets if you want to consider that a fee.) Here's what the current interest rate is on S$10 million of margin:

First S$150K: 1.716%
Next S$1.35M: 1.216%
Last S$8.5M: 0.716%

Blended Rate: ~0.799% (if I did my math right)

That's an interest only collateralized loan, please note. There's no requirement to repay principal on any particular schedule. You can defer principal repayment as long as you wish, and as long as you maintain adequate or better collateral. For margin up to S$150 million, as long as you've got the collateral you're good to go, with a mouse click or tablet tap. Which is pretty astonishing, really, but there it is.
Non-sense, really.

The latest 3 month SIBOR rate is 0.43775. These change on a daily basis, the ballpark i provided is correct.
Source: https://www.abs.org.sg/benchmark-rates/rates-sibor
i would love to hear your imaginary numbers

Margin loans from IB are subject to liquidation in real-time if you fail to meet margin. That risk itself makes your argument an apples to orange comparison. Have you ever considered how much collateral you need to cough up to get a 10M loan SAFELY compared to a property loan? With property, i only need 3M or less to secure that 10M loan safely. I reckon you've not familiar with securities margin in reality but only in theory. Have you ever used it?

Properties, equity and bonds are different asset classes and fit for different purposes. The key benefit of property is leverage, and its the cheapest and safest form of leverage you can obtain as a retail investor. Period.
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Old 30-07-2020, 05:10 PM   #57
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That guy has never bought a property using bank loan in the world (let alone Singapore)!
That is why till now despite all our explanations, he still doesn't understand why buying property you can borrow 8x more money than borrowing from IB (and still at cheaper interest rate).

That guy has never borrowed any money from IB too!
That is why he claimed about borrowing $10M from IB with $0 as collateral!

Because of ignorance, that is why keep comparing apple to orange!

Non-sense, really.

The latest 3 month SIBOR rate is 0.43775. These change on a daily basis, the ballpark i provided is correct.
Source: https://www.abs.org.sg/benchmark-rates/rates-sibor
i would love to hear your imaginary numbers

Margin loans from IB are subject to liquidation in real-time if you fail to meet margin. That risk itself makes your argument an apples to orange comparison. Have you ever considered how much collateral you need to cough up to get a 10M loan SAFELY compared to a property loan? With property, i only need 3M or less to secure that 10M loan safely. I reckon you've not familiar with securities margin in reality but only in theory. Have you ever used it?

Properties, equity and bonds are different asset classes and fit for different purposes. The key benefit of property is leverage, and its the cheapest and safest form of leverage you can obtain as a retail investor. Period.
First of all, no, that's just not true. Plonk a stack of 6 month SGS T-bills on the table as collateral and you've got no problem getting a great loan rate. All lenders care about is quality collateral, and they especially love highly liquid high quality collateral (which is not real estate).

Also, the 3 month SIBOR isn't 0.436% any more. I'm looking at current, up-to-the-moment rates, not past rates.

Let's suppose you borrow S$10 million at this instant, as I write this, from Interactive Brokers. There are zero fees to do this, please note. (Except for the lower tier rate brackets if you want to consider that a fee.) Here's what the current interest rate is on S$10 million of margin:

First S$150K: 1.716%
Next S$1.35M: 1.216%
Last S$8.5M: 0.716%

Blended Rate: ~0.799% (if I did my math right)

That's an interest only collateralized loan, please note. There's no requirement to repay principal on any particular schedule. You can defer principal repayment as long as you wish, and as long as you maintain adequate or better collateral. For margin up to S$150 million, as long as you've got the collateral you're good to go, with a mouse click or tablet tap. Which is pretty astonishing, really, but there it is.
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Last edited by chrisloh65; 30-07-2020 at 05:15 PM..
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Old 30-07-2020, 06:50 PM   #58
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A 20% drop will wipe your leveraged equity investment, not property. That’s the key you need to understand.
Ah, no, not necessarily or even very often. It depends on the degree of leverage. Moreover, 6 month T-bills (for example) aren’t going to fall in (Singapore dollar value) by 20%. It’s MUCH more realistic for real estate to do that, and more. One nearby industrial accident would get the job done, as one example.

The latest 3 month SIBOR rate is 0.43775.
No, that’s last week’s SIBOR. It was lower then.

These change on a daily basis, the ballpark i provided is correct.
Not if you’re trying to argue over a few basis points versus current.

i would love to hear your imaginary numbers
IB publicly posts its current rates daily. There’s nothing imaginary about that.

Margin loans from IB are subject to liquidation in real-time if you fail to meet margin. That risk itself makes your argument an apples to orange comparison. Have you ever considered how much collateral you need to cough up to get a 10M loan SAFELY compared to a property loan? With property, i only need 3M or less to secure that 10M loan safely. I reckon you've not familiar with securities margin in reality but only in theory. Have you ever used it?
Now you’re just putting words in my mouth.

Properties, equity and bonds are different asset classes and fit for different purposes. The key benefit of property is leverage, and its the cheapest and safest form of leverage you can obtain as a retail investor. Period.
No, a retailer cannot get the rate you’re citing, period. And the rate you’re citing is not even current and not even fee/cost inclusive.
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Old 31-07-2020, 02:25 AM   #59
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err, i think you guys are still comparing apples to orange, the leverage for them works differently. as pointed by fluxos "Properties, equity and bonds are different asset classes and fit for different purposes. The key benefit of property is leverage, and its the cheapest and safest form of leverage you can obtain as a retail investor. Period."

in that sentence, there is an irony. Since they are different, you cannot then define it's the safest. its situational

i'm a layman, so let me illustrate in simple terms:

- I have 200k, say i decide to invest only one option, either in stocks or in property.
- if i invest in 1mil property, i have to borrow 800k on 2% interest rate (don't quote why i don't use those near 1%, those bluff one lar, after few yrs shoot up)
- if i compare to stocks, how you want to compare? taking loan of 800k to match the 1mil property situation? play CFD with 5x leverage? (if so don't need to loan so why compare interest rates?)
Conclusion: which scenarios you guys are comparing, think in real terms, real situation.

2. for property, i briefly mentioned about amortisation and other costs. This means if you just cannot compare the final selling price of stock vs property (you have to minus off all the costs involved)
- for above example of taking 800k loan, 2% interest. Say renovation plus initial charges/fees add up to 50k (usually lot more since ppl want good rental).
- do you know that by year 3, you have lost 46k interest? few sub scenarios then:
- If your house appreciates 3% yearly, you barely break even
- If your house don't appreciate, but full rental, you barely break even
- If both the above happens, good, you earned in the range of 50-100k
<<for the above scenario, if you draw the timeline longer, of coz it's better, i.e. if you invest in property for longer term, you pay more principal so breakeven closer>>

3. If i invest the 200k plus loan 800k for stocks (or 200k CFD 5x, for the leverage effect with CFD costs. Similarly there are different risks, property is due to appreciation/depreciation and rental, stock is simply... rise or fall lor. so how to compare... say i die die want to compare... i buy something with expected dividend yield of 6%, my loan interest is 3% (anyhow hamtum), you actually earned 150k (final profit minus interest)
<<then of coz my scenario is purposefully biased to stocks, which is why if you change the factors for both property and stocks, you will realise everything changes>>

as such, the comparison on interest rates is ... not relevant...

disclosure: i owned bit of stocks and and am a small landlord, which is why i believe... diversify lah
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Old 31-07-2020, 10:00 AM   #60
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For me, borrowing costs is not key, valuation is key. You may be borrowing cheaply to buy an asset expensively.

Me play with all 3 - Equity, Property and Bonds. I will invest whichever offers the best value. The trick therefore is to be able to determine what is the intrinsic value of the asset u are investing. Obvious and simple rule: Accum if undervalue, Sell if overvalue.

Once u know what something is worth, the next step is then to determine how best to finance it - what is the right mix of cash and leverage. That's when the borrowing cost will come in.
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