📈 Sbloc vs. selling investments for down payment: which is better for home purchase?
Evaluate whether an SBLOC or selling investments is the optimal strategy for your home down payment, considering interest, taxes, and market risk.
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Inspired by this Q&A post from this Reddit thread.
A Securities-Backed Line of Credit (SBLOC) lets you borrow against your investment portfolio without selling assets. This avoids immediate capital gains taxes and keeps your investments in the market. However, an SBLOC is a loan that accrues interest. It also carries a significant risk. If your portfolio's value drops, your lender can issue a maintenance call, forcing you to add more collateral or sell securities at an inopportune time. This calculator compares the direct costs and risks of using a short term SBLOC against selling investments for your down payment. It helps quantify the trade off between paying interest to keep your investments and paying taxes to be debt free.
This section models the SBLOC scenario. Input the details of your potential loan, including the amount, the value of the portfolio you will use as collateral, and the interest rate. The most critical input here is the maintenance LTV requirement, which determines your risk of a maintenance call.
This section models the alternative: selling investments to raise cash. The main cost is the capital gains tax you must pay on any profit (the sale price minus your original cost basis). This is a one time cost, and you will have no debt or interest payments. The primary drawback is losing the potential future growth on the amount you sold.
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For further related reading, check out:
📊 Results
SBLOC Interest Cost
Capital Gains Tax
SBLOC vs. Sell Cost Difference
Decline to Trigger Margin Call
Last updated by mahmoud (v25.8.1)
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Disclaimer: This content and any calculations provided are for informational purposes only. The views, calculations, and methodologies expressed are those of the author and do not necessarily reflect those of this platform. Not financial advice. Users are solely responsible for any decisions made based on this information.
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