Are you a retiree with plenty of assets but not enough income to qualify for a conventional loan on the home that you want?
If so, you may be considering using a loan against your portfolio, but please think twice. This is not an ideal loan for you – or anyone – to use as a long-term loan.
With this type of financing, known as a “margin loan,” you’re allowed to borrow up to half the value of your non-retirement portfolio held in taxable accounts.
The benefit is that there are no appraisals, no closing costs, and no prepayment penalties. You’re securing the loan against your own money, so you won’t have to qualify based on income.
So why isn’t this wise?
First, because margin loans are variable rate loans. Secondly, the rate varies from one broker to another, and it’s a high rate. To find a reasonable rate, you’ll have to shop – and then you might need to move your investments. And still – the rate will be higher than that of a conventional 15 or 30 year fixed rate mortgage.
Next, you face the very real possibility of a margin call if the value of your investments declines. And in today’s volatile economic climate, who can predict whether stocks will rise or fall?
In short – this is a very risky loan. It’s fine for short term loan, but not for a long term home loan.
The next consideration is your tax situation. With a margin loan you won’t be able to deduct mortgage interest. This may or may not matter to you, but is a subject to discuss with your tax professional before making any decisions.
So what should you do?
Consider selling some of those assets to either purchase the house outright or make a large enough down payment to qualify for a conventional loan.
Or… wait just a bit.
Very soon Homewood Mortgage will be announcing the addition of an asset-based loan product.
We don’t have the details yet, so stay tuned. As soon as we know, we’ll announce it right here.
In the meantime, give us a call. You may only think you can’t qualify for the loan you want. Let us find out. If your income falls a bit short, we’ll be glad to work the numbers and show you just how much you’d need to put down in order to qualify.
Call today at 800-223-7409. It’s our job to help you achieve your goals, and we’re pleased to do that job.
Homewood Mortgage, LLC
Toll FREE: 1-800-223-7409
18170 Dallas Pkwy
Dallas, TX 75287