Cobretti2 on 21 November 2012
| Wlakiz said: ... if you guys have taken out a mortgage before you would understand the concept. Lets say you borrow $300k from the bank to buy a home . In the bank's perspective, they are happy because they get free money from charging you interest rate, and you are happy yourself because you get to live in a new house or w/e. With a stroke of luck, you win a lottery and you get $70k. You can either put that money into the first mortgage and cut your amortization period by 10 years or you can do something smarter and use that $70k to put in a second down payment and get a second mortgage. Whoa whoa, wait you say, you're just going into deeper debt, because you have two mortgage to pay now! Yep, that's true but you see when I get a new home I can rent it out and use the rent to pay the mortgage, so basically my asset doubled and I pay the same amount as before. Is Sony's situation the same? Absolutely! They are borrowing more money to invest on products/ventures that would yield them returns. What happens if the investment does not yield the desired return? No problem, it is still within their power to sell whatever they invested to pay off their creditors. The only 'risk' is if their investments becomes worthless and selling wouldn't help them pay off the creditors in which they would have to default on their payment. Right now, Sony is selling part of their assets so they can get the cash to keep the creditors happy and for them to continue investing. |
Good luck doing that in Australia.
The rental return alone will not be enough to cover the second mortgage.
