Pledged Asset Program

Pledged Asset Program – use assets as collateral to offset LTV

Many borrowers have accumulated assets in the form of stocks, bonds, mutual funds, etc. However, in order to purchase the home, they would have to liquidate those assets for the down payment. What if I could offer the borrower a program where they could use their assets as collateral for the loan without having to liquidate? After all, if they liquidate their assets, they would be subject to a hefty capital gains tax, and, they would be pulling their assets out of an income bearing vehicle. We allow the borrower to “pledge” their assets in lieu of down payment (or LTV for a refinance). This way the borrower can keep their assets where they can continue to work for them. With Pledged Assets, we will lend up to $5,000,000 or more at 90% LTV with no mortgage insurance!


Example of Pledged Assets –

Example 1:

• $1,200,000 purchase price

• 70% = $840,000 (our max LTV) – $360,000 down payment of 30%

• 90% = $1,080,000 – $120,000 down payment of 10%

• 20% or $240,000 is the difference – this is the pledged amount of assets needed as collateral

• Loan Amount = $1,080,000 – 90%

• Down Payment = $120,000 – 10%

• Pledged Amount = $240,000 – 20%.  Assets are pledged to offset $240,000 of down payment


Example 2:

• $5,000,000 purchase price

• 60% = $3,000,000 – $2,000,000 down payment of 40%

• 90% = $4,500,000 – $500,000 down payment of 10%

• 30% or $1,500,000 is the difference – this is the pledged amount of assets needed as collateral

• Loan Amount = $4,500,000 – 90%

• Down Payment = $500,000 – 10%

• Pledged Amount = $1,500,000 – 30%. 
Assets are pledged to offset $1,500,000 of down payment



Avoid capital gains tax – HUGE advantage – why have your clients cash out a huge chunk of their portfolio for a down payment? Now they don’t have to. You continue to manage all their assets.

• Assets continue to grow from interest or dividends. No need to pull assets out of an income generating vehicle. Isn’t it better to pay a 5% mortgage and make 9% investing?

• Any person may pledge assets on behalf of borrower – no gift letter required.

Available on all products and occupancy types including Interest Only and may be used in conjunction with Asset Depletion.

• Loan amounts up to $10,000,000 or more with a minimum 10% down with no Mortgage Insurance.

• The assets may remain at borrower’s own financial institution – this means you get to continue to manage their portfolio. Why let Bank of America / Merrill Lynch or another private bank take your client away from you?!?!?

• There is no alteration to the assets themselves…the borrower can continue to trade in the portfolio as long as the value remains.

• The borrower can sweep profits off the assets.


PARENTS BETTER TO PLEDGE THAN TO GIFT. Parents love their kids. However, that love might not extend to the parents liquidating their assets to help out their kids. Mom and Dad would lose the investment growth and interest from their assets if they do the gift, and, they might be subject to a nasty capital gains tax if liquidating investments. But if the parents “pledge” their assets for the down-payment instead of a gift, then those assets remain in their own investment accounts and continue to earn. The kids get their house…Mom and Dad are credited with helping the kids out despite doing practically nothing other than having a pledge contract placed on the assets, they avoid taxes, and their assets continue to work for them…plus you get the loan and look like a bona fide genius, EVERYBODY WINS!


Eligible Assets – Eligible assets must be held in an account based in the U.S.

• Stable Assets (savings, money market, CDs) the pledge is 1:1. 
$1,500,000 pledge use $1,500,000 worth of assets as collateral.

• Volatile Assets (stocks bonds, mutual funds) the pledge is 2:1. 
$1,500,000 pledge use $3,000,000 worth of assets as collateral.


Release – The loan can be paid down and the pledge may be released without triggering a pre-payment penalty any time. If the property has increased in value rendering a pledged asset no longer relevant, usually a minimum of 36 months must have passed. Releases are at the banks discretion and the borrower must be current on loan payments with no delinquencies in the last 12 months.