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.
Great tip, @guifig! I’m sure this can come in handy for many
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.
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%.
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 ?
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.
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).
Or, if you are in the US, get yourself an Interactive Broker account, dump your cash into securities, and borrow cash equivalent to about 50% of the portfolio value, at practically incredible interest rates. (Margin Rates and Financing | Interactive Brokers LLC)
Sure, but that’s only 50%. Then you have to leave some cushion for regular margin fluctuation, since margin is calculated realtime and they’re going to hair-trigger liquidate. So you can maybe borrow 30% of your actual portfolio. and your interest is floating. but it def is cheap, if you’re into it. and yeah, they’re great for moving money around. that’s how I got my funds there. wire transfers for EUR 8. only downside is they charge negative interest rates on EUR balances above 100k.
For US people.
As said above First Tech Fed loan fixed interest for 5 years from 4.5% which is pretty good if you think of a potential inflationary environment. This is more a “loan” style (fixed term, rate, etc.)
Morgan Stanley does a “line of credit”, called LAL (Liquidity Access Line) so you can borrow/decrease/increase at any time. I was quoted 4% + LIBOR (4.09% at time of writing), which was also good, but I prefer thee fix interest.
Schwab have a Pledged Asset Line, min $100k, haven’t got back to me about rate, but I’m starting too get feeling all US Liquidity products are 4%.
All 3 are USD so you’d end up using the Interactive Brokers method to get a great rate and to move to your EU bank. Both allow much lower minimums, e.g. $100k loan is fine (the suggested 500,000 EUR/USD mins are higher than GV need, e.g. EUR 360k is all that is needed (e.g. 10k for fees).
Though I’d love to know the Swiss banks and which products if people tried. I’d prefer a loan denominated in EUR to reduce currency risk.
I just wanted to add, that in Portugal, Millennium BCP Private Bank and Santander Private do securities backed loans. Usually the minimum amount for this type of operation is 100.000€. And the banks only loan up to 70%/75% of your portfolio, also they only work with USD and EUR assets. The interest rates are usually under 2% per year, but you can negotiate them.
Regarding Millennium BCP, I do know that the loan can be offered as a personal loan (No questions asked, and the money is deposited in your account), or as an line of credit account (They create a new account with the money in, and you transfer to your daily account as you need, you only pay interest for the money you use, and a monthly fee on the remaining money you don’t use. Money is available 24/7 on App and website, and you just need to transfer to your daily account to use it).
As the money can be in your main account, you can use this money for your GV, and of course you can transfer the money to any other bank you want
I believe the GV requirement is the money can’t originate in PT, so a loan from a PT bank can’t constitute the minimum amount
You can get a loan for amounts above the minimum, e.g. 350,000 EUR from outside and you could get a loan for additional investment, e.g. buying a bigger property/more investment fund units.
I’m about a week away from my loan being approved (TD Bank turned out to have the best rate and will loan against Mutual Funds) so US investors are welcome to message me directly if they are curious on the details.
