The main issue high-net-worth families face when buying their dream home isn’t affordability. It’s timing and liquidity.

Whereas a traditional mortgage might mean selling your investments, a pledged asset line (PAL) allows you to access liquidity using eligible investments as collateral.

▶️ Watch the latest Money Moves with Darin podcast episode to learn more about how PALs work, their potential benefits and risks, and how they might fit into your home-financing strategy.

 

Transcript:

When you’re buying your dream home, the challenge isn’t always affordability. It might be timing and liquidity instead. While a traditional mortgage is the common solution, there’s another method that many families aren’t aware of.

Traditional Mortgage Alternative: Pledged Asset Line (PAL)

If you have a substantial investment portfolio, a pledged asset line, or PAL, might be worth considering either as an alternative or a complement to a traditional mortgage.

A PAL allows you to borrow against eligible non-retirement investments without selling them. This can help preserve your long-term investment strategy while potentially avoiding unnecessary portfolio withdrawals and capital gains taxes.

PAL Advantages & Disadvantages

Compared with a traditional mortgage, a PAL may offer lower upfront borrowing costs, competitive interest rates and faster access to funds, sometimes even as little as one business day.

It also gives you greater flexibility in how you finance a home, whether you use it as a primary source of financing, as a short-term bridge between transactions, or alongside a traditional mortgage as part of your overall financial strategy. If your investments continue to grow, those gains may help offset some of the interest costs, too. However, because the loan is secured by your portfolio, a market decline could require you to add collateral or repay a portion of the loan. And interest rates are typically variable.

PAL vs. Traditional Mortgage

In comparison, a traditional mortgage offers predictable monthly payments, long-term financing, and interest rate certainty, but it often comes with higher upfront closing costs, a longer approval process, and more documentation. When comparing your options, a traditional mortgage may be best if you value payment stability and long-term financing. However, a PAL may be worth considering if your priorities are preserving liquidity, maintaining your investment strategy, and accessing capital quickly.

The right approach depends on your overall financial picture and goals. If you have questions about whether a pledged asset line or traditional mortgage may be the right fit, or curious how they can potentially work together for you, feel free to reach out. I’m happy to help you evaluate your options and work alongside your lending professional to determine the best approach.

Until next time. This was Money Moves with Darin.