James yang

Like other homeowners, your upscale clients lost equity in their homes during the recession, and just like other homeowners, many are choosing to remodel rather than move. Though tight home equity lines may not be a pressing concern for this group, these homeowners may be wary of using their cash savings or disturbing other investments for a renovation project. There is another option: securing loans using financial portfolios as collateral.

Jim Cantrell, senior vice president – investments, wealth adviser for UBS Financial Services, in Long Beach, Calif., says that his company offers loans to clients who have assets such as stocks and bonds through UBS. Each type of asset has a “release rate” that allows clients to borrow 50% to 90% of the asset investment for any purpose (except buying securities). “If you had a $1 million portfolio, you could receive an approval of $500,000 to $700,000,” Cantrell says. “The vast majority of clients who use securities-backed lending use it for real estate — either to buy or to improve.”

Since the financial institution uses the client’s portfolio as collateral, it can offer competitive rates for adjustable or fixed-rate loans. For example, Cantrell says, a $500,000 variable rate loan could have a rate of 3.575%. In addition, unlike a standard bank loan, the application process is abbreviated and takes just a few days. “There are no application fees, no closing costs, no tax returns, or proof of employment required,” he says. The homeowner can also apply for the loan but not activate it until the money is needed.

Cantrell discusses this loan option with most of his clients who have eligible portfolios. He says that remodelers should inform high-end clients about this option during the sales process because “securities-based lending is extremely competitive and very flexible.”

—Nina Patel, senior editor, REMODELING.