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  • Sell stocks or get home equity loan for down payment?

    We have paid off nearly half or our 500k home and we are planning to move and get a bigger property in the 1.2 million range.
    Planning to use a doctor's mortgage and put down as little as possible in down payment. I am hoping to find in the 5% range or maybe 10% without PMI.

    Would you:
    1) Sell stocks (from taxable account of around 1mil, not touching ira or 401 account) which are growing (mostly tech stocks) to put towards down payment. Once old home is sold, can always rebuy more stocks I suppose.
    2) Take out home equity loan and use that to put towards down payment? Not even sure if this is possible??? And leave the stocks to keep growing?
    3) Use emergency cash of 120k or so towards the down payment and replenish once house is sold? I mean worse case senecio, can always use credit card to pay for stuff while I sell my stocks.

    Anyone do something like this?


  • #2
    I’ll just address #1. I think it depends on whether tech stocks have a long term role in your portfolio, the nature of the gains (short vs long term), how your state will tax them, and whether you have any carry over losses from TLHing to cancel them out. If you want to get rid of the tech stocks with minimal tax consequences then it could be a win-win.
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    • #3
      Depending on your brokerage... M1 you can borrow up to 35% account at 2% and deduct the interest

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      • #4
        Originally posted by auggie1983 View Post
        Depending on your brokerage... M1 you can borrow up to 35% account at 2% and deduct the interest
        Can u explain more?

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        • #5
          Alternatively, you can borrow from your 401k/403b and not sell. I agree with others, look over your portfolio and review your individual stock holdings; if you were to start from scratch i.e. with cash, would you have the same exact portfolio or would you decide to sell some of these holdings?

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          • #6
            Originally posted by STATscans View Post

            Can u explain more?
            It’s a margin loan. Basically any brokerage where you have your investments can do it (after you apply for margin). M1 just has great rates.

            I used a margin loan for an ASC buy-in since I didn’t want to sell stocks and didn’t have the cash lying around.

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            • #7
              Originally posted by STATscans View Post
              We have paid off nearly half or our 500k home and we are planning to move and get a bigger property in the 1.2 million range.
              Planning to use a doctor's mortgage and put down as little as possible in down payment. I am hoping to find in the 5% range or maybe 10% without PMI.

              Would you:
              1) Sell stocks (from taxable account of around 1mil, not touching ira or 401 account) which are growing (mostly tech stocks) to put towards down payment. Once old home is sold, can always rebuy more stocks I suppose.
              2) Take out home equity loan and use that to put towards down payment? Not even sure if this is possible??? And leave the stocks to keep growing?
              3) Use emergency cash of 120k or so towards the down payment and replenish once house is sold? I mean worse case senecio, can always use credit card to pay for stuff while I sell my stocks.

              Anyone do something like this?
              I actually did a little of all 3 (except mortgage not home equity).

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              • #8
                Originally posted by abds View Post

                It’s a margin loan. Basically any brokerage where you have your investments can do it (after you apply for margin). M1 just has great rates.

                I used a margin loan for an ASC buy-in since I didn’t want to sell stocks and didn’t have the cash lying around.
                Wow, interesting. Never knew about this. I have account at fidelity and their rates are around 4 % if you borrow a million and up to 8.3% if you borrow less than 25k.

                So technically you could borrow on margin and buy a house , as opposed to going the mortgage path.

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                • #9
                  Originally posted by STATscans View Post

                  Wow, interesting. Never knew about this. I have account at fidelity and their rates are around 4 % if you borrow a million and up to 8.3% if you borrow less than 25k.

                  So technically you could borrow on margin and buy a house , as opposed to going the mortgage path.
                  Yeah the rates aren’t great (except m1). But I paid it off in a few months and also wasn’t really near my limit so a margin/maintenance call was very unlikely.

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                  • #10
                    just use the emergency money if it isnt going to be that long. wouldnt want to be buying stuff back potentially much higher, of course you could get lucky and get them lower, but cant bank on that.

                    you already have the money, use it.

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                    • #11
                      Why not sell your home first and then buy the second home?

                      If not possible , would use emergency fund, even though it does not sound like an emergency , more of that you just want a bigger home. Selling stocks and creating a tax liability , I assume, would in theory cost you more money than using your emergency fund if it is in cash.

                      Borrowing money at a higher rate than your mortgage in order to mortgage your house would be more expensive.

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                      • #12
                        Originally posted by STATscans View Post

                        Wow, interesting. Never knew about this. I have account at fidelity and their rates are around 4 % if you borrow a million and up to 8.3% if you borrow less than 25k.

                        So technically you could borrow on margin and buy a house , as opposed to going the mortgage path.
                        https://www.fidelity.com/trading/mar...s/margin-rates. 4% and rates go up.
                        The deduction is investment interest expense. Deduction is limited to investment income with a carry forward.
                        Margin requirements apply. Market drops, you need to come up with cash or sell (3 days). If you don’t, they will. Remaining loan will ramp up interest rate.
                        Keep in mind, your account loss % will amplify because you are leveraged. Small margin loan avoids the mortgage frictional costs. Higher interest.

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                        • #13
                          Not a fan of margin loans for a few reasons, basically Tim’s comment re: market dropping and loan being called. Very risky. Personally, would go for the e-fund, far lower risk. Why pay interest when you can use money on which you’re earning basically nada?

                          Oh, and recommend you rebalance your taxable account to a method that avoids stock-picking, regardless of what you do with the proceeds.
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                          • #14
                            Originally posted by jfoxcpacfp View Post
                            Not a fan of margin loans for a few reasons, basically Tim’s comment re: market dropping and loan being called. Very risky. Personally, would go for the e-fund, far lower risk. Why pay interest when you can use money on which you’re earning basically nada?

                            Oh, and recommend you rebalance your taxable account to a method that avoids stock-picking, regardless of what you do with the proceeds.
                            Agree. You have $120k in emergency cash, I wouldn't sell stocks unless you're otherwise wanting to rebalance or reposition etc.
                            Then if you have an emergency you could do the margin loan or CC or take out a HELOC

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                            • #15
                              Man…, a margin loan to borrow to buy a bigger house?…. With my luck, an asteroid would be spotted approaching earth the day after I did that, or the new untreatable “COVID Eyeball Bleeding Variant” would emerge, and the market would crash, and I’d get margin called and my account liquidated to cover. That move would terrify me. Hot stock market, hot real estate market... If the market turned on you at the wrong time, you could be in for a world of pain. If you go this route, move quickly.

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