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Because repossessing property is (statistically speaking) more likely to work out for the bank than repossessing whatever random stocks an investor decided were
by eqmvii 9y ago
Because repossessing property is (statistically speaking) more likely to work out for the bank than repossessing whatever random stocks an investor decided were a sure thing. That's why margin accounts aren't available to everyone, and margin calls kick in to protect the investment firm before total loss.
Housing is volatile, but stocks are significantly more so, and with significantly more near-total losses over time.
- kelnos 9y agoIn addition to that, the bank knows what they get back if you default on your loan: your house. If you want to invest in the market, the bank has no idea what stocks or funds you'll be investing in, and can't even remotely guess at what they'll get back if you default.
- aianus 9y agoWhen you borrow money to invest in stocks the stocks are in an account that the bank can seize when the net value is low enough. It's much much easier to repossess than an illiquid house.
- mSparks43 9y agoIts funny that you are the only mention of default on the entire page. When the majority of student loans will default. And its easy to skip them just by emigrating to a better country - of which there are lots.
- aianus 9y agoYou have this exactly backwards. Stocks are much easier to repossess and liquidate during a margin call which results in margin interest being lower than mortgage interest. You can't get as much leverage as you can with real estate but that's because of government regulation not because banks are unwilling.
- sokoloff 9y agoFrom most brokers, margin rates are higher rate than mortgage financing. Etrade, Fidelity, Schwab, Merrill, Scottrade, Ameritrade, Vanguard are all (much) higher than mortgage rates right now. Some deep discount houses (IB and TradingDirect among likely some others) are lower than mortgage rates.