Stuck With A Home? Hedge Your Bets

Posted by Joe Manausa on Monday, October 26th, 2009 at 9:09am.

Creative Solutions for people stuck in a homeMany home owners are stuck with a home that they cannot (or will not) sell in today's market of falling home prices. They are looking for creative solutions and we have written many articles in the past about creative solutions to today's real estate problems.

Today's solution is a bit "out there" because it won't be for everybody and it is restricted to people who have a fairly healthy stock portfolio. But even if these constraints don't fit your problem, this will still be a healthy read because the same creative process might help you find a solution to your current housing problem.

Consider A HedgeLoan To Replace Your Mortgage

HedgeLoan Creative Financing Solution

One of the traps that people [who own a home that they do not want  to own] find themselves struggling against is a fixed mortgage amount secured by a falling-value home. The amount of the loan remains relatively unchanged while the value of the collateral is falling. Imagine if they could change the collateral from the home to something with less risk for the homeowner.

Enter the Hedgeloan. This is a loan product that does not require a lien on your home, but rather uses the value of your stock portfolio (or a portion of it) as collateral. What makes it so great is that once in place, if the value of your portfolio falls, you have the option to surrender your portfolio as full satisfaction for the loan. It's like giving your home back to the bank, without the negative credit ramifications that come with it.

How Does The Hedgeloan Work

A Hedgeloan can be used to borrow money for any reason. I have written this to demonstrate how using a Hedgeloan could help a frustrated homeowner satisfy a home mortgage and give the homeowner more flexibility in handling the disposition of the home. But how does a Hedgeloan work exactly?

Your stocks or other option-able securities remain in your own account and title at the well-known, major, SIPC-member U. S. brokerage/banking firm that the Hedgelender has arranged for your account. All of the normal rights and privileges of a conventional regulated U.S. brokerage account are provided, along with the services of a licensed account adviser. Your loan documents are delivered to you by the Hedgelender, as are your account statements. The loan is put in place when you sign your loan agreement and agree to a common lien on your securities until the loan is paid off.

Imagine If You Hedged Two Years Ago

How many times have you said "If only I had ...." Well, if you had taken out a Hedgeloan two years ago, most likely the value of your portfolio would have dropped far greater than the loan-to-value that you made against it. This would have given you quite a hedge against the drop of the stock market in 2008. For somebody with a million dollar portfolio, this could have meant a savings (less losses) of over $100,000!

Use A Hedgeloan To Replace Your Home Mortgage

By using a Hedgeloan to replace your mortgage, you will no longer have a mortgage lien against your home. This allows for you to be much more creative in the sale of your home. It also makes your home far more sale-able, as many potential buyers cannot purchase a home with conventional bank financing anymore.

Your freedom from a mortgage lien could allow you to provide full or partial owner financing, as well as structure a long or short-term lease purchase for a qualified buyer. The key is flexibility, which is critical for homeowners with expensive homes.

Find Out More About Getting A Hedgeloan

If you think you might be a candidate for a Hedgeloan, here is what I recommend you do:

I think with proper due-diligence, many high-end homeowners (or people with large stock portfolios) will find an interesting alternative to their current financing situation. The flexibility that a free-and-clear property provides could very well be the difference between selling a home in this market, and having to hold on to it for quite some time.

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Joe Manausa is a real estate blogger, a real estate investor and the Broker and Co-Owner of Joe Manausa Real Estate. He can be reached via e-mail through the Tallahassee Real Estate Website or catch his latest writings on the Tallahassee Florida Real Estate Blog , or by calling (850) 386-2001.

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Joe Manausa, MBA is a 26 year veteran of real estate brokerage in Tallahassee, Florida and has owned and managed his own company since 1992. He is a daily blogger with content that focuses on real estate analytics and providing his clients with a tactical advantage in today's challenging market.

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