I have done this to purchase real estate. It’s no problem. I opened a credit line with a large bank and they loaned me 75% on my stock. They range from 70-75%. I would check around, banks vary on the ratio they will offer you. Also, the percentage depends on the type of stock [how risky they consider it]. They will hold it as collateral. I looked into borrowing from a brokerage account and the terms were much less favorable. I think they were lending more in the 50% range. The equity line is available just like a HELOC and at 1% above prime, interest only. The rate does adjust, of course, with the prime rate. I’ve found it an excellent way to leverage. You might not want to draw up to the maximum your credit line will allow because then they require principal payment. These are all the terms that I got… obviously it may vary.
stock as collateral for real estate - Posted by Tommy Ray
Posted by Tommy Ray on September 30, 2003 at 13:37:11:
I am looking to buy a small apartment building. I want to use stock as collateral for my down payment. Does anyone knw of a good lender than would let me do this?
If you are offering stock (I’m assuming a large, established firm – think Proctor and Gamble, IBM, etc.), plan on them offering 50% of the market value of the stock. So, if the stock’s value is $50,000 they’ll take the stock as collateral to loan you $25,000. Or something in that ballpark. Good deal unless the value drops BELOW the 50% mark (or whatever percent they have loan you). Maybe the brokerage firm in which you have the account will loan you the money.
Final thought – if the stock is in a 401(k) or IRA…forget it. They are not able to be pledged as collateral.