As a Wealth Advisor, you know your clients’ financial lives better than anyone. Sometimes even better than they know their own. You work very hard to get your clients and sometimes twice as hard to retain them. You need to be able to offer your client more than just investing their money in mutual funds. Managing your clients financial lives means incorporating their mortgage into that plan. Whether the best loan for them is a standard, conventional 30 year fixed or the Home Ownership Accelerator loan (All-in-One loan) or anything in between, I have access to virtually every single loan program available in today’s mortgage market. To see our full line of loan programs, please click here.
A few private banking portfolio programs now exist that I want to highlight for you and your clients. Having access to private, portfolio banking programs allows us the flexibility to underwrite loans without having to worry about Fannie/Freddie guidelines. Below is a sample list that many of the financial advisors, CFP’s and CFA’s I work with have used in the past for certain clients in certain situations. Please let me know if you have any questions.
PROBLEM – Your client has $3,000,000 with you and then calls to tell you he is buying a house and needs to pull out about $2,000,000 of that money. You will lose most of that investment portfolio because your client needs the down payment. What if I told you that your client can leave the majority of that money invested with you and YOU can continue to mange and grow that account and the assets stay under YOUR control… you wouldn’t be as concerned about another investment advisor getting their hands on your client.
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 generating 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 – 30% down payment required
• 70% = $840,000 (our max LTV) – $360,000 = down payment of 30%
• 90% = $1,080,000 – $120,000 = down payment of 10% from borrower required
• 20% or $240,000 is the difference – this is the pledged amount of assets needed as collateral
• Purchase Price = $1,200,000
• Loan Amount = $1,080,000 – 90% (No Mortgage Insurance)
• Cash 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
• Purchase Price = $5,000,000
• Loan Amount = $4,500,000 – 90% (No Mortgage Insurance)
• Cash Down Payment = $500,000 – 10%
• Pledged Amount = $1,500,000 – 30%. Assets are pledged to offset $1,500,000 of down payment
Advantages:
• 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 (checking, 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.
ASSET DEPLETION PROGRAM – The Underwriter uses liquid assets as a source for more qualifying income on the application. This is a very straightforward program. I am able to take your clients liquid assets (checking accounts, savings accounts, money-market accounts, CDs, stocks, bonds, mutual funds, trust funds, NO annuities, NO equity in REO, assets held in a retirement account are eligible when the borrower is of retirement age) and apply a monthly income figure to those assets based off of the clients age and amount of assets. This is especially great for self employed clients as well as trust fund and wealthy clients and solves the debt to income issue when qualifying for a mortgage. This program allows me to group all of your clients assets together to give them a monthly income figure based off of their age and the liquid assets that qualify.
EXAMPLE:
Borrower’s income is $5,000/month and his DTI is too high to qualify. However, the borrower has $1,000,000 in “liquid” assets. The borrower is 60 years old. Based off of this scenario, I am able to add an additional $5,846 a month to his income (we have a grid that shows ages and assets and the income figures that apply). So now his qualifying income is $10,846 a month.
CASH RECAPTURE PROGRAMS – This is a program that is not a DTI relief program, but a very popular program for many borrowers right now. It is the Cash Recapture program. About 1/3 of all homes, these days, are bought with 100% cash. There are a couple different reasons for this strategy, but the issue I am concerned with is the loss of liquidity for your client. Fannie Mae and Freddie Mac require 6 months from the date of purchase before cash may be taken out of the property. We do not. To combat this, we have two different cash recapture programs to offer your clients.
1. Following a recent purchase we have no 6 month seasoning requirement like Fannie/Freddie does. The loan is priced as a non cash-out refinance and is available on a 5 or 7 year ARM. Please click here to learn more about this particular cash recapture program.
2. The Home Ownership Accelerator Loan (All-in-One Loan). Please click here to be taken to my website for this particular loan and please let me know if you have any questions at all about this incredible loan product.
My team and I look forward to helping you and your clients in any way we can!
