Secured Lines of Credit

Matt from EWA. Jamison from EWA. Today we are talking about style trends. That’s why we have this new blue and green. Jameson’s got the nice little vest here. Actually today we’re talking about line of credits and why a secure line of credit makes a lot of sense for high net worth individuals, high income earners, to maximize your balance sheet and growth long -term and also be tax -efficient and remove a lot of the worry of the day -to -day or month -to -month or even a year -to -year basis of the markets going to do or not do.

Jamison, give us a high level. Why would someone want to utilize a non -qualified brokerage account specifically for the purpose of setting up a secure line of credit? Absolutely. So, can use the brokerage account as collateral. Let’s assume a million dollars is in the brokerage account.

Run the line of credit. It will give you up to roughly 80% of that. So, you get an $800 line of credit. Benefits are, if the market’s up, you don’t have to worry about taking the money out of the market. And if the market’s down, you don’t have to worry about locking in losses.

You can also pull the money out tax -free long -term. If the portfolio is going to grow at 7% right now because interest rates are so low, we can draw money out roughly around 3% so that portfolio is still growing at a net of 4%. Okay. So, let’s just use specific examples.

Let’s say a client has a million -dollar non -qualified portfolio and they go through, you know, one institutions we partner with to open up a line of credit. Let’s say they get a half million non -of credit, but let’s say they never use it. Yes. So, to open the account doesn’t cost you anything.

If you never use it, also, there’s no cost to it. There’s only the fee, not the fee you’d pay interest if you draw on it. Okay. Excellent. So, if I’ve got the half million non -on -a -credit, let’s say I need $200 ,000 for a real estate transaction. Let’s say my kid’s going to college and the market’s down.

I pull from it. What are my duties back to the institution with the line of credit? Do I have to pay interest only? Do I have to start paying principal? Give us some details around the time frame. Yeah. So, it’s different than a fixed installment loan. You can pay this back however you want to.

A specific example, just had a client draw on a line of credit. They bought a house. They’re flipping it, and then by the end of this year, they’re going to resell it, replenish it back in. So, best time to do is if there’s a short time frame and you know you are going to put the money back into it.

That’s smart. So, by doing that, they avoided a lot of the traditional mortgage fees, etc., on that real estate transaction. Thank you for going so much into detail about the line of credit. So, most important question today, I think everyone wants to know myself included.

Where do I get one of these sweater, puffer, vest things? Yeah, I actually got this at Costco. Normally, don’t buy clothes there, but I had a good recommendation from someone that they have a good clothing section, and I really like this. I love it. All right.