Stock Loan and Securities Finance: A Better Way to Buy Real Estate in Today’s Market?
Did you know your clients can buy real estate with a loan collateralized by your stock or other securities, such as mutual funds or bonds? If not you should! A stock loan like this offers a means to tap your stock’s equity without having to sell them outright. The shares remain in your account and title, always accessible. The program is managed by a major, licensed U.S. financial institution.
If you have been in this industry awhile you have seen many changes. The most recent change is probably the most damaging to your business because banks have made it very difficult to obtain many kinds of loans. Without financing, the real estate market has been crippled. Almost everyone involved in real estate – from brokers to buyers to mortgage companies – has had to deal with this pitfall in some manner over the last year.
With these securities-backed loan programs the credit score, employment status etc. do not determine your loan, only the quality of your stocks. Of course as with any loan, the borrower must be able to service the interest-only payments, but paperwork is very minimal and cash delivery can be in a matter of a few days. Almost every securities owner will qualify for at least one of these programs.
There are two ways this can be used when it comes to real estate. For example, they can use the loan to buy the property outright, free and clear. They could also use just part of the stock loan proceeds for a down payment that might then qualify them for a loan they couldn’t have received otherwise.