Raising a Construction Deposit: Strategies for Gathering Funds Essentially
Cashing in on Your Securities Portfolio: Funding Your Property Dreams
Having a securities portfolio is often viewed as a long-term savings plan, but when it comes to buying a property, the question arises: should you dissolve the portfolio for equity, or are there other options? This guide will explore how to leverage your portfolio for property financing.
Securities, such as stocks and bonds, have become increasingly popular due to their potential for higher returns than traditional savings options in low-interest-rate environments. With a well-diversified portfolio, you could potentially earn between 6-8% returns, although it's essential to remember that investing always comes with risks. No one can predict with certainty whether the prices will rise or fall.
Bring Your Portfolio to the Table
"It's understandable that you're keen on keeping your investments portfolio," says Thomas Saar, a real estate financing expert at Dr. Klein. "And you don't always have to sell your securities. You can use them for your property financing without dissolving the whole portfolio." However, not all banks and portfolios are open to this arrangement.
Leveraging Your Securities for Better Terms
Your securities portfolio can act as collateral to secure a better deal with the bank. "When the portfolio is doing well, the bank sees it as a sign of your financial stability," explains Dirk Eilinghoff, a real estate and interest rate expert at Finanztip. "By informing the bank about your portfolio, you increase your creditworthiness and might be eligible for better credit terms."
Negotiate Discounts and Terms
When using your securities as collateral, the bank typically doesn't recognize the full value of the portfolio but discounts it. "Expect discounts of 40-50% on the portfolio value due to the bank's security-oriented approach," warns Thomas Saar. In other words, a portfolio valued at €100,000 may only be recognized for €50,000-€60,000 as collateral, depending on the structure of the portfolio.
Active Repayment Strategies
Your securities portfolio can be used more actively to repay your construction loan. For instance, you can use dividends from your portfolio for financing or settle the remaining debt with your portfolio value after a certain period, such as 10 or 20 years. However, these strategies require negotiation skills and an understanding of financial matters.
Institutional Differences
The way financial institutions handle customer deposits can vary. "Some secure all access rights to prevent changes, while others want the customer to transfer the entire or partial deposit as security. Others are fine with leaving the deposit as it is," says Thomas Saar. It's crucial to negotiate deposit management terms with your particular bank.
Navigating the Financial Jungle
If your bank doesn't seem receptive, selling your deposit and realizing capital gains might be the next best option. "By selling your deposit, you exchange its return potential and associated risks for a stable interest rate," says Eilinghoff. Remember that taxes may be due on the profits, potentially amounting to up to 27.99% with additional surcharges and church tax.
In conclusion, utilising your securities portfolio for real estate financing without dissolving it can be an effective strategy. By leveraging your securities as collateral, you can fund your property purchases while maintaining potential future gains and dividends. However, consider the risks and negotiate with your bank to determine the best approach for your situation.
When considering real-estate financing, don't overlook your securities portfolio. Leveraging your stocks and bonds as collateral can increase your creditworthiness and potentially secure better terms with the bank. However, banks often discount the portfolio value due to their security-oriented approach, and it's crucial to negotiate deposit management terms with your bank. When banking institutions aren't receptive, selling your securities and realizing capital gains might be the next best option, but remember the potential taxes associated with such a move.
