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

Ambassador
2,270,856
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
110,566
Chuck Mixon
Cutler Bay Specialist
The Keyes Company

Great piece of information, explained very well.

September 30, 2012 06:57 PM
Rainmaker
1,002,504
Ginny Lacey 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
433,376
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
161,287
Phil Caulfield
Mortgage Lender - San Francisco Bay Area
Absolute Mortgage Banking

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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Additional Information

Read about news, reviews, and commentary about current events and trends in the real estate industry. I also write about local markets including Silicon Valley and my hometowns - Los Altos and Saratoga.