With the way the stock market is running, many people do not want to liquidate their accounts to make a large down payment on a home.
They are conflicted because they want to make a large down payment to get a better interest rate, but do not want to sell the assets in their investment accounts and pay taxes on any gains.
By pledging their assets to the lender, they will be able to keep
money in the market and be given credit for a large down payment.
Example, a couple is looking to purchase a $700,000 home, and want a conforming loan amount of $400,000 to take advantage of the better rates. They have $500,000 invested in mutual funds that are making a very good return, and $100,000 in a checking account. The pledged asset program allows them to borrow up to 90% of the value of the home, so they can borrow $400,000 from the mortgage lender, pledge $230,000 of the assets in their mutual fund to the lender, and make a $70,000 down payment from their checking account. This allows them to have the lower loan amount while keeping their investments in the market and avoiding tax.
Contact us if you want to consider this or other creative financing for your home.
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