The loan does not care. If the portfolio is down 20%, the interest payment on the first of the month is exactly the same.
That sentence is the whole risk of leveraged investing, and everything else on this page is a consequence of it.
On a 100% no margin call structure: nothing extra. You continue paying interest and the position stays where it is.
On a multiplier structure: you may be required to pay down the loan — at the point where the position is worth least.
Yes. The loan is repayable in full regardless of what the investment is worth. A large enough decline can leave the outstanding balance greater than the value of the portfolio securing it. No structure removes that.
So why does anyone do this?
Because of what it does to time. Saving $500 a month for twenty years means the money starts working in instalments — the last contribution works for a single month. Investing the full amount at the start means all of it works for the entire period.
That is the structural difference leverage buys, and it is the whole argument. Whether it pays off depends on one thing: the investment has to out-earn the cost of the borrowing over the period you hold it. Nobody can promise that it will, and anyone who does should worry you.
What can be controlled is whether you are still holding when the answer arrives:
You cannot be forced out. On a 100% no-margin-call structure the lender has no mechanism to demand a pay-down during a decline. A bad year only becomes a realised loss if you choose to sell.
The carrying cost is usually reduced by the interest deduction. Where the structure qualifies, interest on money borrowed to earn income from property is generally deductible — see interest deductibility. Whether it applies to your situation is a question for your accountant.
It is screened before it starts. We check that the interest stays payable through an income interruption, not just on the day you sign.
It is rarely the drawdown by itself. It is a drawdown at the same time as an income interruption — a job loss, a slow year in the business, an illness.
A falling portfolio is survivable while the interest keeps being paid. The interest not being paid is what forces the sale. Which is why the assessment before you borrow is about income stability, not about market forecasts.
The honest test
Annual reviews look at how the structure behaves in a decline, not only at what it returned. Where circumstances change, we would rather restructure early than watch a position get sold at the bottom.
We will not tell you the market will recover. Nobody knows that. What we will do is make sure your plan does not require it to.
Borrowing to invest involves risk, including the risk that the value of your investment falls while the loan remains payable in full. This page describes how these arrangements work in general and is not a recommendation to borrow or an offer of credit. Suitability depends on individual circumstances.