Should I buy a home with an asset-based loan?

By
Real Estate Broker/Owner with Catarra Real Estate, Inc CA BRE #01191946

For people who have a lot of equity in other assets such as stocks or collectibles, borrowing against the value of those assets might be a good way to go to finance the purchase of a home.  There are several major considerations with asset-backed loans.  The primary one is leverage. 

The idea of an asset-backed loan is that you have one or more assets with a value sufficient to borrow against for buying a home.  You get a small portion of the value of those assets which is borrowed at a rate higher than typical loan rates.  The lender has the right to liquidate the assets should you default on the loan.  Why would you do all this?

Here are some reasons for using an asset-based loan to buy a home:

  • You hold stocks or other investments that have lost value but could recover in the future
  • You hold stock that could be sold in the future (e.g. pre-IPO)
  • You have a collection of artwork or other collectibles you don't want to sell

Any of these reasons is good enough to use this tactic.  You could even have other real estate investments that lost value but could recover in the future.  Borrowing against those has both leveage and tax advantages.  Consult your tax advisor for insights into what strategy is best to pursue.

I can recommend people who have experience in arranging asset-based loans.  If this sounds like something you would be interested in discussing prior to buying a home, call me and I will refer you to well-qualified advisors on how these loans work.

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Topic:
Mortgage / Finance
Groups:
San Francisco Bay Area Real Estate
Tags:
equity loans
asset based loans
asset backed loans

Comments 9 New Comment

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Rainmaker
637,031
Laura Allen, Lake Tahoe - Truckee Real Estate for Sale www.TahoeLauraLuxuryHomes.com
Tahoe Real Estate Agent Helping Buyers and Sellers
Coldwell Banker, Tahoe City, CA (530) 414-1260

Bryan - This is a great way for buyers to go that have stocks, bonds, or other assets that they don't want to sell right now, but if they were liquidated would give them the cash to buy real estate.  Excellent information for buyers to have!

September 29, 2012 04:45 PM
Rainmaker
342,145
Shannon Milligan, Richmond VA Real Estate Agent
RVA Home Team - Winning with Integrity.
RVA Home Team with Jefferson Properties

Great information many may not think about when deciding on purchasing a home. Anyone looking to buy a Los Altos home for sale with an asset based loan would be wise to call you!

September 29, 2012 06:24 PM
Rainmaker
604,596
Sussie Sutton
UTR TEXAS Realtors - Rep for buyers and sellers.
UTR Texas Realtors

I think this is a great idea and I am not ashamed to say I have never had experience in this type of loan. I will however learn it and implement it in the future. Thanks for this little tidbit.

September 29, 2012 06:48 PM
Ambassador
2,365,165
Patricia Kennedy
For Your Home in the Capital
Evers & Company Real Estate, Inc.

Bryan, what a great idea!  It seems like we learn something new every day arounnd here.

September 29, 2012 07:08 PM
Ambassador
2,365,165
Patricia Kennedy
For Your Home in the Capital
Evers & Company Real Estate, Inc.

Hey, Bryan, I included this post in Last Week's Favorites.  Have a great week!

September 30, 2012 05:38 PM
Rainmaker
119,542
Chuck Mixon
Cutler Bay Specialist, GRI, CDPE, BPOR
The Keyes Company

Great piece of information, explained very well.

September 30, 2012 06:57 PM
Rainmaker
1,051,199
Ginny Gorman
Homes for Sale in North Kingstown RI and beyond
Phillips Post Road Realty ~ 401-529-7849~ RI Waterfront Real Estate

Bryan, great share..I have a buyer doing this now but wasn't familiar with it until i talked to their lender...very timely.

October 01, 2012 03:42 AM
Rainmaker
444,038
Gay E. Rosen
Honest, Hardworking and always Professional!
Houlihan Lawrence

Bryan - really interesting.. I am going to ask our local mortgage person about this and see how it is handled.. great post.

October 01, 2012 06:14 AM
Rainmaker
168,501
Phil Caulfield
Mortgage Lender - San Francisco Bay Area
Opes Advisors

Hi Bryan - this strategy is a great way to maximize your mortgage interest deduction if the lender securitizes the house in addition to the other assets!

October 01, 2012 11:11 AM
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Bryan Robertson

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