I mentioned this when we did it, thought I would report back on how it is working.

We bought 3 places last year. By #3 we were running short of cash. Couldn't get loan as we don't have jobs (didn't even ask, actually) and HELOC was taking forever to come through - actually didn't come through until February so we've never used it. I guess it's there is we needed it though.

But Charles Schwab Bank offers what it calls "Pledged Asset Loan." NOTE: you CAN'T use IRA or 401k for this, but if you have other securities, you can pledge a certain portion against an interest-only loan. Some pretty severe drawbacks: if you have volatile stocks and they drop below a certain range your loan or part of it could be called and stocks sold out from under you.

But we didn't take ALL we would have been allowed, and when the market did tank it didn't hurt the loan at all, just reduced the amount we could possible further borrow. We committed to paying it off within a year and a half or so, and so far right on track with that.

The loan stays open - you can draw on it as needed like a HELOC. Rates vary - but so far ours has been decent 4.5%.

GRRR I wish I could typos.

Note: we COULD have sold stocks to buy the property, of course, but that sets up tax consequences and once sold hard to get back to that position again.

Merrill Lynch has the same thing. Loan value on stocks is I think around 60% but bond loan values are 70% or more. It's basically a credit account that has a checkbook and monthly statements. I used it to purchase my home and remodel, then refinanced the whole thing into a regular loan once the renovations were done. I also used it to buy cars or big repairs.

Most security/stock firms will offer asset based loans as a for an investor to borrow against their portfolio and buy more "Stocks". A way to leverage their "Stock Portfolio of investments".

BUT, some "Novice" investors will borrow to much when a "margin" call comes in. Depending on the security used to borrow on, the holder has limits of the percentage of the underline value for which they can borrow. If a Stock is very volatile, then they have limits. A great stock like Apple may allow a 50% loan. But a crappy stock or unstable stock like "Oil", will be reduced to only a 25% loan.

SO imagine you buy a property for $100,000 and paid cash from borrowing 50% against your $200,000 stock account. Then an asset in your portfolio is re-classified as "junk" and you can now borrow only 25% of the value, $50,000. You will have a margin call for $50,000 and have only days to pay it back!

Where are you going to come up with the money? Your broker won't wait. They will sell stocks to cover your shortfall...

Can't borrow from our 401k because it's private, not held by a company, and we are old enough to withdraw from it without penalty but there is always taxes! However our back-up plan was that if the market tanked enough to jeopardize the loan, the IRAs are there to cover.

These work great in rising markets. Since then your loan never gets called. These are terrible when the market goes down. Then you are forced to sell low. Generally speaking it is a very risky loan for this reason.

These work great in rising markets. Since then your loan never gets called. These are terrible when the market goes down. Then you are forced to sell low. Generally speaking it is a very risky loan for this reason.

As noted, we have an IRA which would cover the loan. Just didn't want to take it out because of taxes (no penalties, we are older than 59.5.) So this was a good option for *us*.