Securities-backed loans from Swiss banks at low rates (valid for the Portuguese Golden Visa program)

Residencies & citizenships 🛂 Portugal Golden Visa 🇵🇹
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#1

I’ve decided to share this idea since not many people seem to be aware of it and it has been raising a lot of interest lately, both from Golden Visa applicants and from investors in general.

If you hold a portfolio of securities (equities, bonds, etc.) and you need cash (whether to make a Golden Visa related investment or for any other reason), you don’t necessarily need to sell your securities. Depending on your country of residence (e.g. some banks might not accept US clients or require higher minimum amounts for US clients) and the investment grade of the securities you hold (e.g. Apple shares or German bonds differ from Venezuelan or Argentinian bonds), you might be able to obtain a securities-backed loan from an eligible Swiss bank (not all Swiss banks will engage in this type of transaction).

Depending on your personal circumstances and negotiation skills, you may expect loans to reach between 60% and 70% of the value of your securities’ portfolio with interest rates typically ranging between 0.70% and 1.% per year for loans denominated in EUR, and 1.5% and 2% per year for loans denominated in USD. Custody fees typically ranging between 0.30% and 0.55% may apply. Depending on your country of residence, banks might consider portfolios as low as EUR/CHF/USD 500k, but most banks require portfolios with a value of at least EUR/CHF/USD 1million.

These loans are deemed personal loans (i.e. you can do whatever you want with the cash) and are usually 1-year loans, renewable for similar periods of time (i.e. the loan will keep renewing for as long as the portfolio stays with the bank).

This idea may be used by anyone wanting to generate cash without having to sell his/her securities. In addition, if your portfolio performs well (i.e. above the loan’s interest rate and custody fee), this could well mean that you are investing using free money.

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Portugal GV Lawyers for investment option
#2

Great tip, @guifig! I’m sure this can come in handy for many :slight_smile:

If just like to add that Interactive Brokers has a similar offering open to both US and non-US residents.

Since many already invest with them and their fees are incredibly low you should check if they can offer you what you need. I don’t recall the specifics, but I believe you may not be able to take out as big of a loan (as a % of assets) as you could with the banks Gui mentioned.

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#3

Hi @guifig , thanks for the tip. Can you share more details on which swiss banks allow this ?, I am interested to know more regarding this option.

Thanks,
Harish

#4

Thanks @guifig!

I understand the concept now…

Cheers,
Harish

#5

On a related note, there are banks in the US too which give secure collateral loans. The amount varies from bank to bank. I’ve personally dealt with First Tech Fed, which gives you $75 in loans for every $100 as collateral for loans up to $1M. The interest rate starts at 4.5%.

#6

That’s interesting. If I’m understanding this correctly that means investors do not have to tie up their entire €350-500k in cash with bonds or RE for the GV application. They cld actually borrow against their securities/ bonds at home and off set the Swiss loan fees with our higher returns at home. Hence continuing to invest the principal amount what would have been a Portuguese investment with v marginal returns. Am I making any sense ?

#7

Also possible in Singapore, but you’ll get only around 50% of the portfolio value. And they’ll only take into account larger blue chip shares and small list of ETFs.

#8

Thank you!
Is there a short list of banks you can suggest so we dont call all of them?

#9

There isn’t a list because it depends on your country of residence and how much your portfolio is worth

#10

Just to make it clear, these securities-backed loans are totally unrelated to the GV. These are available to anyone (who meets the conditions for the loan) and for any purposes whatsoever (once the loan is granted, you can start a fire with the cash if you want).

As for the GV, these loans might be interesting for people who would need to sell a portion of their financial portfolio in order to have enough cash to make the investment for GV purposes. Depending on the kind of assets you hold in your portfolio during the duration of the GV (and therefore on how good they perform during that period), this could mean that your GV investment is made with money lent by a bank and for which you paid less than what you earned from your portfolio (in other words, free money).

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#11

Dear Gui, does it work the other way around? Can I use the fund invested for GV purpose as a collateral?

#12

I don’t think you can because the fund units will be (and need to stay) registered in your Portuguese bank account.