Where to get a line of credit these days?

I have a weird sitch.

I bought my house in September of 2020 from my parents for $490,000.00. The house is a double lot, that is right next to the university of Denver (a private university that has a TON of demand). The housing market out here is incredible. People keep buying homes around me and scraping them then building these multi million dollar mansions - I’m not joking. Go on Zillow and look for yourself - just search the DU neighborhood.

My parents honestly cut me a HUGE ass deal too. The fair market value of this place was over $550k this summer. And I only owe $360k.

Now, the last little tidbit of information is that I also have six figures in my brokerage account that is pretty heavily invested in Tesla (this is not the focal point of my situation). But, how in the mother ■■■■ can I pledge any of that in order to secure a HELOC so that I can improve my house? I’m not interested in paying short term cap gains, so, I need this done in the most tax efficient way possible. Most banks are saying that because it’s only been a few months that they won’t send someone out to re-appraise the property - which really limits me in what I can establish a LLC for.

I’m also probably going to spend $30k as a down payment to buy another rental property in cherry creek - which will require paying cap gains on, but whatever.

You shouldn’t have any trouble getting a HELOC? Most banks should give you 75-80% LTV… I can’t imagine why they wouldn’t send an appraiser out for that business. If the bank that has your mortgage won’t do it check out a competitor who likely wouldn’t have any problem going in second position for a 50k heloc.

You could also just borrow on margin against your brokerage account. Check out the margin rate but they’re usually pretty reasonable.

And lastly it’s possible to do a blend and extend on your mortgage, without incurring a break penalty. Essentially the bank will give you additional funds on your existing mortgage and blend the interest rate with today’s rates, while extending the term for an extra year or two.

Waaaaaait… E*TRADE will let me take cash out on margin? That’s a thing?

Yes! You can withdrawal up to the “available balance”, which is your actual cash in the account plus margin available, which can be taken out as a margin loan

I’m not sure how these things work in the US and A but isn’t it very tax inefficient to actually buy a house from your own parents? First they (possibly) pay tax on what you pay them and eventually that money flows back to you and you pay inheritance tax?

Wouldn’t it be the exact same scenario if the parents just sold to a third party? And I think there’s an exemption on the first 12m of estate value in the US.


If you used IBKR I’d just get a margin loan. But other brokers are pretty expensive, so I’d probably try an actual HELOC

I’d like to restate something… obviously I know you can take cash out on margin.

That was stupid of me to say^^

But in order for me to get the $150k that I want to spend, I’d have to sell a lot of TSLA - which hurts me 35% on until October…

It’s a bad situation to be in making money on a stock like that.

Could try some L3 CFA stuff and set up a short sale against the box. Short Tesla, invest proceeds in a money market fund and borrow 100% against the position. Technically it’s constructive sale for tax purposes, but I don’t know how they’d catch you. And you lose all upside on Tesla, but you’ve locked in your profit and can access the funds (potentially) without immediate tax consequences.

But I also think heloc is the path of least resistance. There’s a mortgage broker out there just itching to you give you one.


What’s the rush?

I get that interest rates are the lowest they’ve ever been, but with the Fed chasing inflation, they should remain low for the foreseeable future. This would lead to increasing sales prices / comparable values. Not to mention materials costs are still high.

Waiting 6-8 months for your property value to rise may improve your loan terms if you’re seeking a fixed dollar amount and decrease some of your supply-related costs.

You can refi completely with a broker at a lower rate. Take out 80 percent of the home. Then you can take a home equity loan at discover at 4 percent up to 90 or 95 percent. That’s about 165k. If that isn’t enough, you can use your brokerage and pull out cash against it. I know 2 places who will give you cash at low rates. Interactive brokers will do it at 1.5 percent and m1 finance will do it at 2 percent. M1 finance will do 35 percent of your equity and ibkr will go for 50 percent of equity so about 35k to 50k. If that isn’t enough you can always get adu construction loan financing. I’m not sure how terms are for those though. Anyways best of luck! An adu is surely a good investment. So for it imo!

Do not use margin. You should used a securities based line of credit that is cheaper than margin. Generally equities have a 65-70% LTV and you can borrow against that, cash, bonds, etc. Between 2-3% depending on the value of the collateral.

DM me for details. I do it with clients all of the time and did it for myself on a kitchen project.

Also, a securities-based line of credit is more liquid and generally offers more cost-efficient borrowing than that of a HELOC.

There is one thing that needs to be rushed - which is building a new garage. I currently don’t have anything securing my backyard from our alley. I’m meeting with the architects on Thursday though. The Landscaping architect said she won’t get out of bed for less than $15 grand . I wonder if she’d ever want to sell call options on Amazon stock.

Let’s talk my man.

M-A-F-I . . . well . . . you get the idea.

I don’t know, you might be right. I just think I remember reading that a rule of thumb of estate planning is that the cash should always flow downstream.
btw, I wish we had those kinds of exemptions over here!

Vectra Bank in CO should be able to give you a HELOC without pledging shares. Just contact them if you haven’t already. They can be pretty flexible, I work in real estate. If it doesn’t work out with them, then others have shared their ideas below. Cheers and good luck.

Vectra Bank also should be able to get your HELOC done in Denver. Without pledging shares. It’s pretty simple with them usually and your numbers look good based on above. Good luck and cheers.

No ones giving me a heloc. I only bought the house 3 months ago… which is a problem for these banks I guess?

A guy, with 100k in his brokerage, and 200k of equity in a house can’t get even a $35k heloc.

I am starting to feel my anger for the generations before me creep up again… and I’m telling you, when these banks all go under someday I’ll be soooo pleased.