4 ms·

From what I've heard from everyone everywhere on HN, banks are willing to give you a loan knowing you have a lot of stock in a big tech IPO. (Even if you can't

From what I've heard from everyone everywhere on HN, banks are willing to give you a loan knowing you have a lot of stock in a big tech IPO. (Even if you can't liquidate for 6 months) I don't know how much you need but presumably more than the home is worth. I'd love to hear some real world examples of people doing this. I'm curious if you need 20% down because that alone will put most of these folks who have been living off their salary alone out. (You can't easily save 20% down in less than 10 years for a $2-4m home on a single startup salary)

PopeDotNinja 8y ago
> From what I've heard from everyone everywhere on HN, banks are willing to give you a loan knowing you have a lot of stock in a big tech IPO That could have gotten me in trouble when I was younger. I had startup stock that traded at $50+ on the day of the IPO. When the lockup ended, the stock was trading at $12. At the time, I more likely to think the stock was going to $1200, not $12. I'd likely have ended up owing a bunch of money I couldn't pay off AND a big tax liability. If I were in that situation today, I'd see if I could find someone who would give me money at today's price and get N shares of stock in 6 months (the duration of the lockup period).
- CydeWeys 8y ago
  It would've been bad for you, but the bank would've been OK. Mortgages are collateralized loans, so they'd just get the house, plus whatever money you had left, and it wouldn't be a big loss for them. I don't think you'd be able to get a non-collateralized loan based on putative IPO stock value.
  - PopeDotNinja 8y ago
    > I don't think you'd be able to get a non-collateralized loan based on putative IPO stock value. I've heard that people with a ton of stock can find people willing to work with them. If you have $100 million USD in HawtStartup, I'm sure someone who believes that stock is going WAY up would be happy to buy at today's price w/ some discount in 6 months. Kind of like how farmers sell futures. I'm not an expert on the subject, and I've never had the kind of equity locked up, so who knows.
- greenleafjacob 8y ago
  > If I were in that situation today, I'd see if I could find someone who would give me money at today's price and get N shares of stock in 6 months (the duration of the lockup period). Employees are typically prohibited from shorting the stock.
dlubarov 8y ago
We tried getting an asset backed mortgage recently. There are definitely some options which don't require 20% down, although they tend to have higher APRs. Even with 20% or more down though, we found it difficult to get a good APR. There was one lender who offered an APR which was comparable to income based mortgages (~4% for 30 year fixed), but their program had very stringent requirements. IIUC, they took 80% of our taxable assets and 60% of our retirement assets, and assumed that amount would be uniformly depleted over the mortgage term. That model seems extremely pessimistic, but I guess it accounts for the fact that some borrowers won't invest responsibly. This lender calculated a debt-to-income ratio by dividing the mortgage payments (plus HOA etc.) by the asset depletion income, and required that the ratio be at least 66. I think different programs have different debt-to-income requirements. So let's say a borrower wanted a $1m mortgage from this program. If it's 30 years fixed at 4%, the total mortgage cost would be ~$1.7m. To reach the 66% debt-to-income with their formula, the borrower would need ~$3.2m of taxable assets, or ~4.3m of retirement assets! That's assuming no other income, no HOA fees, etc. There are other programs with less stringent requirements, but they seem to have APRs of at least 5%.

PopeDotNinja 8y ago

> From what I've heard from everyone everywhere on HN, banks are willing to give you a loan knowing you have a lot of stock in a big tech IPO That could have gotten me in trouble when I was younger. I had startup stock that traded at $50+ on the day of the IPO. When the lockup ended, the stock was trading at $12. At the time, I more likely to think the stock was going to $1200, not $12. I'd likely have ended up owing a bunch of money I couldn't pay off AND a big tax liability. If I were in that situation today, I'd see if I could find someone who would give me money at today's price and get N shares of stock in 6 months (the duration of the lockup period).

CydeWeys 8y ago
It would've been bad for you, but the bank would've been OK. Mortgages are collateralized loans, so they'd just get the house, plus whatever money you had left, and it wouldn't be a big loss for them. I don't think you'd be able to get a non-collateralized loan based on putative IPO stock value.
- PopeDotNinja 8y ago
  > I don't think you'd be able to get a non-collateralized loan based on putative IPO stock value. I've heard that people with a ton of stock can find people willing to work with them. If you have $100 million USD in HawtStartup, I'm sure someone who believes that stock is going WAY up would be happy to buy at today's price w/ some discount in 6 months. Kind of like how farmers sell futures. I'm not an expert on the subject, and I've never had the kind of equity locked up, so who knows.
greenleafjacob 8y ago
> If I were in that situation today, I'd see if I could find someone who would give me money at today's price and get N shares of stock in 6 months (the duration of the lockup period). Employees are typically prohibited from shorting the stock.

dlubarov 8y ago

We tried getting an asset backed mortgage recently. There are definitely some options which don't require 20% down, although they tend to have higher APRs. Even with 20% or more down though, we found it difficult to get a good APR. There was one lender who offered an APR which was comparable to income based mortgages (~4% for 30 year fixed), but their program had very stringent requirements. IIUC, they took 80% of our taxable assets and 60% of our retirement assets, and assumed that amount would be uniformly depleted over the mortgage term. That model seems extremely pessimistic, but I guess it accounts for the fact that some borrowers won't invest responsibly. This lender calculated a debt-to-income ratio by dividing the mortgage payments (plus HOA etc.) by the asset depletion income, and required that the ratio be at least 66. I think different programs have different debt-to-income requirements. So let's say a borrower wanted a $1m mortgage from this program. If it's 30 years fixed at 4%, the total mortgage cost would be ~$1.7m. To reach the 66% debt-to-income with their formula, the borrower would need ~$3.2m of taxable assets, or ~4.3m of retirement assets! That's assuming no other income, no HOA fees, etc. There are other programs with less stringent requirements, but they seem to have APRs of at least 5%.