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For mortgages, lenders will entirely or heavily discount RSUs for income calculations. However not discouraged by that fact, some tech folks are known to inste

For mortgages, lenders will entirely or heavily discount RSUs for income calculations. However not discouraged by that fact, some tech folks are known to instead have taken out regular non-mortgage variable rate loans with their RSUs as collateral. So there are folks, who bought a house "all cash" with loans backed by stock collateral that is now worth much less. Those types of loans also have a double-digit APR, which might have been fine if you thought you could flip your house for 30-100% in the near future. In the current housing marking it is like putting everything on black at a casino, it might work out, but it might be also be a complete catastrophe.

arcticbull 4y ago
> Those types of loans also have a double-digit APR, which might have been fine if you tought you could flip your house for 30-100% in the near future. Nah not all of them. Margin loans were as low as 0.5% APR, and currently not much higher than that.
- brewdad 4y ago
  Where are you seeing a margin loan rate that low today? Fidelity's current best rate (for over $1MM) is 4.75%. Their base rate is actually 7.85%.
  - jmillikin 4y ago
    https://www.interactivebrokers.com/en/trading/margin-rates.php https://www.interactivebrokers.com/en/trading/margin-rates.p... IBKR charges 2.33% base rate, reducing to 1.58% for balances over 1 million USD.
    - arcticbull 4y ago
      Institutional rates are even lower at, for instance, PMR.
JumpCrisscross 4y ago
> lenders will entirely or heavily discount RSUs for income calculations Multiple lenders, when I was shopping for a mortgage in October, encouraged me to take a variable-rate ARM with a balloon payment when I mentioned my options. (I declined, opting for a 15-year standard instead.) For the lender, as long as you can refinance in 5 years, the risk is minimal. For a borrower, this structure could easily wipe out one's savings.

arcticbull 4y ago

> Those types of loans also have a double-digit APR, which might have been fine if you tought you could flip your house for 30-100% in the near future. Nah not all of them. Margin loans were as low as 0.5% APR, and currently not much higher than that.

brewdad 4y ago
Where are you seeing a margin loan rate that low today? Fidelity's current best rate (for over $1MM) is 4.75%. Their base rate is actually 7.85%.
- jmillikin 4y ago
  https://www.interactivebrokers.com/en/trading/margin-rates.php https://www.interactivebrokers.com/en/trading/margin-rates.p... IBKR charges 2.33% base rate, reducing to 1.58% for balances over 1 million USD.
  - arcticbull 4y ago
    Institutional rates are even lower at, for instance, PMR.

JumpCrisscross 4y ago

> lenders will entirely or heavily discount RSUs for income calculations Multiple lenders, when I was shopping for a mortgage in October, encouraged me to take a variable-rate ARM with a balloon payment when I mentioned my options. (I declined, opting for a 15-year standard instead.) For the lender, as long as you can refinance in 5 years, the risk is minimal. For a borrower, this structure could easily wipe out one's savings.