# Using a share portfolio as equity for a home loan



## ronski456 (11 May 2009)

I was wondering if anyone knows if you can use your share portfolio as equity when applying for a home loan?

If you can:
Does it have to be 'managed' by a fund or can it be a collection that you have bought yourself?

And does it have to be spread across sectors? Are there criteria?

- Ronski


----------



## Junior (11 May 2009)

You could effectively achieve this by setting up a margin loan.  This would obviously introduce the risk of a margin call.


----------



## Jack Payback (11 May 2009)

You would have to go to an unconventional lender to see if they would allow this, but I doubt it.

The lender will always want security over the whole property. They will take all your assets in to account when assessing the application however i.e. if you default on the loan and they sell the property and still don't get their money back they will go after your shares.

Lenders allow using the equity in another property as a deposit, but I've never heard of them using anything else other than cash.

If you do find one, make sure you post it on this site


----------



## Tysonboss1 (11 May 2009)

ronski456 said:


> I was wondering if anyone knows if you can use your share portfolio as equity when applying for a home loan?
> 
> If you can:
> Does it have to be 'managed' by a fund or can it be a collection that you have bought yourself?
> ...




you can easily do this using a margin loan.

The lender will use 80% of the value of the property as security, so you would only have to fund the 20% usally needed for a deposit through your margin loan.

Comsec has a list of the lending ratios they give on their website, depending which company it is they will lend any where from 75% to 35% of the shares value.

So for example if you wanted to buy a house for $300,000,.. the bank would lend you 80% of that value so you would have to come up with $60,000 deposit,... But if you had $100,000 of BHP shares the bank will lend 75% of the value of those shares, So they would use upto $75,000 to cover your deposit.

Offcourse as normal though, Having enough security is only part of the issue. You also have to prove you can service the loan. The Bank will want you to service the loans using no more than 40% of you income from all sources, your wage, dividends, rental income etc etc.


----------



## Jack Payback (11 May 2009)

Just make sure you don't tell the mortgage provider you got the cash from a drawdown on a margin loan. 

If you are a first home buyer, and own no other land, they HAVE to ask you to come up with at least 6 months worth of statements showing that you saved the money yourself. It's in the Consumer Credit Code.

The strictest and most conservative lenders have on the application a question you have to answer asking if you got a loan to fund the deposit, if you answer yes it will impact on your application.

You may have some luck with a Low Doc (read sub-prime) loan as the lenders are prepared to take more risk with you. Non-conventional lenders would be the go, probably have a mortgage broker source it for you, they know how to pull the strings to get the loan approved as they get commission out of it.

Just make sure you can service ALL of the debt comfortably before you take the plunge - like any financial decision - do your research first.


----------



## Junior (11 May 2009)

Another option is to sell the entire share portfolio.  Use the proceeds as say a 30% deposit, take a mortgage for the 70% to fund the purchase.  Then set up a separate line of credit using 10% of your property's value and use this loan to invest in the stock market.  Interest is deductible, no margin calls.

Obviously DYOR


----------



## Jack Payback (13 May 2009)

Junior said:


> Another option is to sell the entire share portfolio.  Use the proceeds as say a 30% deposit




Keep in mind any CGT you may have to pay.


----------

