Alternatives to selling stock for mortgage down payment

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Benko
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Alternatives to selling stock for mortgage down payment

Post by Benko » Mon Jan 29, 2018 11:58 pm

Buying my first house so I'm new to all of this. I was going to put 20% down and I'd get a 3.375% mortgage. However I realized that selling off stocks, etc is not optimal tax wise so I'm looking for alternatives. I ran across things called a. pledge assisted mortgages and b. margin loans. Thoughts on this and any other alternatives?

My retirement money is 3/4 in gov't retirement account (TSP) which I could take a 2% loan from and 1/4 in an ameritrade account. Given current returns are more than the 3.375% mortgage I can get (at least putting 20% down) it seems like I should only put down as little as I can et away with and if possible not sell anything or borrow against my retirement if I can help it.

Thanks for your time.
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ochotona
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Re: Alternatives to selling stock for mortgage down payment

Post by ochotona » Tue Jan 30, 2018 5:24 am

Asset backed loan, stock used as collateral. But if the stock value declines the loan gets called, so you'll be forced to sell the stock at a bad price.
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Mountaineer
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Re: Alternatives to selling stock for mortgage down payment

Post by Mountaineer » Tue Jan 30, 2018 7:32 pm

Don't ever buy on credit unless you can pay off totally when the first payment is due. No matter how good it sounds, it isn't. Do not mortgage yourself to someone else. YMMV
Romans 1:16-32
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sophie
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Re: Alternatives to selling stock for mortgage down payment

Post by sophie » Tue Jan 30, 2018 8:18 pm

Sell the stocks.

The other options you described would all cost you probably more than the taxes you'll pay on the sale. Look at it this way: if you kept that money in cash, you'd be paying tax on the interest and wouldn't have enjoyed some nice big gains.

Congrats on the house!
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ochotona
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Re: Alternatives to selling stock for mortgage down payment

Post by ochotona » Tue Jan 30, 2018 9:32 pm

It's probably an historic moment to sell stocks and buy a house!
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Benko
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Re: Alternatives to selling stock for mortgage down payment

Post by Benko » Tue Jan 30, 2018 10:54 pm

Thanks everyone--sell the stocks it is.
Mountaineer wrote:Don't ever buy on credit unless you can pay off totally when the first payment is due. No matter how good it sounds, it isn't. Do not mortgage yourself to someone else. YMMV

Mountaineer--I'd have to sell all the non-retirement accounts investments, take the $50k loan against my retirement and that would almost pay off the house. It would feel really good doing it that way, but since overall return on my investments has been and is more than the 3.375% I'm paying on the mortgage, I'll put the minimum 20% down and keep my investments as is otherwise.
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Re: Alternatives to selling stock for mortgage down payment

Post by whatchamacallit » Wed Jan 31, 2018 1:21 am

I got my first mortgage in 2016 and had the same thought path as you but I started thinking more clearly after about 6 months in.

Think about the mortgage as negative bond. You won't be able to get bonds paying that high of a rate.

6 months in, I had an oh crap moment and realized how out of balance my asset allocation was because of the negative bond. I sold stocks and gold to buy intermediate bonds in retirement accounts to hedge mortgage before owning any stocks or gold.

Sure I could have had a higher return with latest market but that would have been leveraged returns. It could have gone both ways.

I am now hopefully in the last stretch of paying off the mortgage and will actually get a tsp loan to finish it off. Quite a deal, cheap 5 year mortgage refi basically with free re amortizations.

So my advice from a recent home buyer. Sell everything above comfortable emergency fund that is penalty free and put towards mortgage. Then take out general 5 year tsp loan when it can finish off the balance.
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sophie
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Re: Alternatives to selling stock for mortgage down payment

Post by sophie » Mon Feb 05, 2018 10:35 pm

Benko wrote:Thanks everyone--sell the stocks it is.
Benko, you could be the happiest/luckiest guy in the room right now. Did you sell??
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Benko
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Re: Alternatives to selling stock for mortgage down payment

Post by Benko » Tue Feb 06, 2018 3:19 pm

Alas nope.
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