Funding structure for construction projects: methods to accumulate the initial down payment
Title: Smart Ways to Finance Real Estate with Your Stock Portfolio sans Liquidation
If you've got a thriving stock portfolio, you might be wondering if you need to sell your holdings to get the equity for a property purchase. But, there's good news! There are clever ways to incorporate your portfolio into your real estate financing without having to dissolve it.
Stocks and other investments are popular choices when savings interest rates are low, offering the promise of long-term higher returns than time or fixed deposits. However, investing in securities also means taking on risk, and there are no guarantees about price increases or decreases.
Your Bank Needs to Know about Your Investments
"If your portfolio is performing well, it's only natural that you'd want to hold on to it," says Thomas Saar, a real estate financing specialist at Dr. Klein. "And that's possible! It's not always necessary to sell your stocks. With the right bank and the right portfolio, you can use it for a construction project without having to liquidate it."
In principle, a securities portfolio can be integrated into your financing plan as security, both actively and passively. However, it's crucial to inform the bank about your investments, even if you don't plan to use them. This can increase your creditworthiness and potentially help you secure better credit terms.
Get Better Financing Conditions with a Temporary Transfer
Here's an interesting nugget: You can temporarily transfer your securities portfolio to the bank to secure better financing conditions. This pledges the portfolio to the bank as security, allowing you to continue benefiting from any price gains and dividends. But, keep in mind that the bank won't recognize the entire value of the portfolio as security, and discounts of 40 to 50 percent are likely.
Active Repayment Strategies
Your securities portfolio can also be actively used to repay your construction loan. For example, you can use dividends from your portfolio to finance the loan or redeem the remaining debt with the portfolio's value after a specific period, like 10 or 20 years. However, these strategies require negotiation skills and experience in financial matters.
Different Handling of Customer Deposits by Banks
Banks Handle Customer Deposits Differently. "Some banks secure all access rights to prevent customers from making changes, while others want the customer to transfer the entire or partial deposit as collateral," says Thomas Saar. "Ideally, the customer would like to keep the deposit as it is. However, they must negotiate this individually with their bank."
Guide Secure Your Dream Home in Seven Steps! If the bank doesn't respond to your request, don't despair. You can still use your deposit by liquidating it and redeeming the equity for your financing. This path is common because purchasing a home can be financially challenging.
Remember, if you liquidate your deposit, you may face tax obligations. Up to 27.99% of the profits could be withheld for the Abgeltungssteuer, including solidarity surcharge and church tax.
In summary, instead of dissolving your securities portfolio, you can leverage it through collateralized loans or credit lines, structured financing, or integrate it via partnerships or alternative lending solutions. This way, you maintain your investment while obtaining the necessary funds for your real estate construction projects.
Sources: ntv.de, Katja Fischer, dpa
- Mortgages
- Real Estate
- Securities
- Alternative Lending
- Partnerships
- Taxation
- Incorporating your well-performing securities portfolio into your real-estate financing plan can increase your creditworthiness and potentially help you secure better credit terms from the bank.
- To secure better financing conditions, consider temporarily transferring your securities portfolio to the bank as security, allowing you to continue benefiting from any price gains and dividends while using it as a collateral for your construction loan.
