As real estate market prices fall to new, ear-popping depths, the one thing that prevents investors from taking advantage of the great buying opportunities is the scarcity of money. 

Banks aren’t ready to open up their safes.  Borrowers aren’t willing or able to meet the more severe regulations imposed by Fannie Mae and Freddie Mac.  Home equity loans aren’t appealing with all the paperwork and costs required, not to mention today’s deflated values that have already milked most of the equity out of the property. 

Investors don’t want to secure private funds if it means paying 10-12 up front points or high interest rates. Even the wealthy that have money but are hesitant to part with their cash reserves can’t get loans. 

So how can you get financing for real estate?  Stock-secured loans.  This new type of funding, rapidly gaining popularity, allows you to use your stocks or other securities, (mutual funds, CD’s, bonds or treasuries), as collateral for loans, up to 85% loan-to-value in some cases. 

The loan process is surprisingly quick and easy.  It doesn’t matter if the real estate will appraise or not.  As long as you have stocks or securities, that are the only “credit” you need to get a loan. 

Best of all, you don’t have to liquidate any of your holdings, which is especially appealing since their values right now are probably lower than you’d like.  You simply are using them as collateral, even as they continue to grow for you!

Stock-secured loan amounts can range from $50,000 to up to $200 million.  The money can be used for almost anything.  Interest rates currently start as low as 4% interest only.  The borrower doesn’t need to furnish lots of documentation (tax returns, employment records, etc.).  And there are no credit checks.  Again, the only thing required is a stock or securities portfolio to use as collateral.

Terms are typically 1-7 years.  At the end of the term, a balloon payment of the loan balance is due.  When the loan balance is due, the borrower has the choice of a) refinancing the loan, b) selling the stocks pledged as collateral to repay the loan, or c) walking away from the shares pledged as collateral.

Stock-collateralized loans offer a good alternative in today’s credit-crunched economy.  They certainly are an option worthy of consideration for anyone seeking funds for investment in real estate or any other type of major purchase.

For more information on these programs, please email pkirby@greatsecondhomes.com