Borrowing Agains Share Portfolio
Discussion
I wonder if anyone here has any experience of this.
Mrs BC and I own and live an unencumbered house with a value of c£850,000. We want to buy a new build which we can part design ourselves from these guys - https://pelham-structures.co.uk/ . All seems good but they want £400K for the plot with foundations (good as the stamp duty will only be payable on that sum) then the balance in stages during the build. That’d mean either selling my shares of selling up and renting for a while.
Does anyone know if it’s possible to borrow against my share portfolio? It’s worth around £1,250,000 though they’re nominee shares.
Any help much appreciated.
Mrs BC and I own and live an unencumbered house with a value of c£850,000. We want to buy a new build which we can part design ourselves from these guys - https://pelham-structures.co.uk/ . All seems good but they want £400K for the plot with foundations (good as the stamp duty will only be payable on that sum) then the balance in stages during the build. That’d mean either selling my shares of selling up and renting for a while.
Does anyone know if it’s possible to borrow against my share portfolio? It’s worth around £1,250,000 though they’re nominee shares.
Any help much appreciated.
When you say share portfolio, who provides the custody? Any lender will want security over the shares.
When we do this for clients we assess each individual holding and then apply a loanable value to it depending on average daily liquidity, average daily volatility etc. All of this data is then combined giving you your total LV.
Typically the range is 0% to 70%.
Deductions are made for large positions and general lack of diversification.
How many stocks and what is the largest %age holding?
You then tend to pay a fixed margin over say base rate or refinancing rate.
Sometimes an arrangement or admin fee. (0.5%)
Margins vary but I’ve seen 0.50% to 2.5% depending on the overall relationship.
When we do this for clients we assess each individual holding and then apply a loanable value to it depending on average daily liquidity, average daily volatility etc. All of this data is then combined giving you your total LV.
Typically the range is 0% to 70%.
Deductions are made for large positions and general lack of diversification.
How many stocks and what is the largest %age holding?
You then tend to pay a fixed margin over say base rate or refinancing rate.
Sometimes an arrangement or admin fee. (0.5%)
Margins vary but I’ve seen 0.50% to 2.5% depending on the overall relationship.
bad company said:
Does anyone know if it’s possible to borrow against my share portfolio? It’s worth around £1,250,000 though they’re nominee shares.
What are you trying to achieve? Do you have substantial Capital Gains that you don't want to pay tax on? Are the investments held in an ISA?What you're talking about is a margin loan, and it's very much doable - several private banks offer it in some form, as do Interactive Brokers. I've never done it through a private bank as the rates weren't great when I looked into it and they seemed a bit funny about lending against a portfolio that they're not managing, but IB offer decent rates and it's pretty easy to set up and manage if you already have an account. The crucial things to understand are the mark to market risk - you can and will get margin called if things fall in value enough to breach certain margin thresholds - and that they can and sometimes do adjust the marginability of a given security with not much notice.
Edited by NowWatchThisDrive on Wednesday 23 March 20:35
Edited by NowWatchThisDrive on Wednesday 23 March 20:38
Panamax said:
bad company said:
Does anyone know if it’s possible to borrow against my share portfolio? It’s worth around £1,250,000 though they’re nominee shares.
What are you trying to achieve? Do you have substantial Capital Gains that you don't want to pay tax on? Are the investments held in an ISA?It is sometimes called Lombard Lending. A lot of wealth management companies offer it with minimum fuss and to quite high rates, but the quid pro quo is they want to sell you wealth management services.
It is an interesting option as you can leave your shares to grow and collect divis which service the loan and also avoid capital gains tax….
It is an interesting option as you can leave your shares to grow and collect divis which service the loan and also avoid capital gains tax….
bad company said:
Panamax said:
bad company said:
Does anyone know if it’s possible to borrow against my share portfolio? It’s worth around £1,250,000 though they’re nominee shares.
What are you trying to achieve? Do you have substantial Capital Gains that you don't want to pay tax on? Are the investments held in an ISA?NowWatchThisDrive said:
What you're talking about is a margin loan, and it's very much doable - several private banks offer it in some form, as do Interactive Brokers. I've never done it through a private bank as the rates weren't great when I looked into it and they seemed a bit funny about lending against a portfolio that they're not managing, but IB offer decent rates and it's pretty easy to set up and manage if you already have an account. The crucial things to understand are the mark to market risk - you can and will get margin called if things fall in value enough to breach certain margin thresholds - and that they can and sometimes do adjust the marginability of a given security with not much notice.
As you rightly say it’s important to understand how IBKR implements a margin call. They will often given you very limited heads up and will just go ahead and sell the shares on your behalf without consulting you.We would call it collateralisation and it's quite common. But we do this for our HNW customers using bespoke spreadbets. The holdings will be crossed at mid to a collateral account and the corresponding spreadbet and chosen margin level booked to the client. That then frees up the capital for whatever period is wished.
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