Strategy 10 of 107
Securities-backed line of credit (higher net worth)
Educational only. I am currently not licensed to offer or sell securities. Figures are hypothetical, not guaranteed. The risk is real: you can lose money, including principal, and a loss can change your lifestyle. Not an offer or recommendation.
What it is
Borrow against a taxable investment portfolio instead of selling it.
Steps
- Borrow against a taxable investment portfolio instead of selling it.
- Pay mortgage principal with the line.
- Pay the line down from portfolio income or planned sales.
Repeat: Reviewed against the portfolio's value at least monthly.
Measure: Line balance against the lender's maintenance requirement.
Try it in the calculator Enter its amount in "One-time amount to principal". Add a payoff goal of 5 years to see what is still needed.
Risks
- If the portfolio falls, the lender can demand cash or sell holdings without asking.
- Rates are variable.
Who it fits
Higher net worth, with assets
Needs
Savings or investments beyond the emergency fund
How predictable
Depends on markets or variable rates
A worked example (hypothetical, not guaranteed)
Picture a hypothetical household (higher net worth, with assets). They owe $300,000 at 6.5% with 30 years left. The required payment is $1,896 a month, and that payment, which comes from income, never changes in this example.
They follow the steps: borrow against a taxable investment portfolio instead of selling it.
Suppose it brings a one-time $30,000 on principal. The loan would be paid off in 22 years 10 months instead of 30 years, saving about $134,798 in interest. To finish in five years, they would still need about $3,387 a month more from other strategies. That is why the five-year sequences stack several at once.
The amount above is chosen only to show the arithmetic. It is not an estimate of what this strategy will produce for anyone. Put real numbers from the fact finder into the calculator.
Sequences that use it
- Asset-rich cycle: Move an asset into principal and recast. Only borrow against an asset when its cost and risk are clearly lower than the mortgage's.
Sources and more information
- FINRA: Securities-backed lines of credit explained finra.org
- SEC Investor.gov: Investor alert on SBLOCs investor.gov
Where to get help
- CFPB: Find a HUD-approved housing counselor (free or low cost) consumerfinance.gov
- FINRA BrokerCheck: check any adviser or firm brokercheck.finra.org
- CFPB: Submit a complaint about a lender or servicer consumerfinance.gov
Related strategies
- 9. One HELOC, used as a sweep account (only with positive cash flow)
- 12. Reverse mortgage (HECM) to retire the payment, 62 and over
- 7. Mutual Pay and Borrow Company policy loan from account value
- 15. Family bank: a parent's loan at the IRS minimum rate
- 16. Equity relay: parent's equity in, child's equity out, parent repaid