A 3% Mortgage? Leveraging Your Stocks to Buy a Home

There may be signs the overheated housing market is cooling, but many buyers still feel like it’s near-impossible to get a house without an all-cash offer, or something close to it.

One way to get your hands on that amount of cash is to borrow against an investment portfolio. It’s a strategy billionaires have used for years to fund their lifestyles: wielding assets such as long-held stock as collateral so they don’t have to sell and be subject to taxes. These days, more of the well-to-do are turning to their portfolios to come up with cash and seal the deal on a home.

It's a risky strategy, especially given how volatile stocks are. But there are some real advantages, and it could actually be a worthwhile move for a careful borrower with a sizable portfolio. The most important thing to remember, though, is that borrowing against investments should never be used to overextend, or buy a home that’s more than you had planned on.

First, a quick explainer on how using investments as collateral works: Borrowers can ask their brokerage firms or banks to set up either a margin loan or a securities-backed line of credit tied to their investment account. Most firms will specify a minimum account size in order to do the transaction. For example, at Raymond James it’s about $150,000, says Randy Carver, a financial adviser at Carver Financial Services in Mentor, Ohio.