For most investors, a Schwab account is primarily a place to save and invest. But through your Schwab relationship and our work as your advisor, those assets may also provide access to attractive borrowing options that are easy to overlook.
Your Schwab Assets May Help Lower Your Mortgage Rate
Clients with qualifying assets at Schwab may be eligible for meaningful mortgage rate discounts. In one recent client example, we were able to help secure a mortgage rate that was 0.50% lower than a comparable market rate—a difference that can translate into significant savings on a large mortgage.
We’ve also found closing costs through Schwab’s mortgage program to be competitive and, in many cases, below what clients are quoted elsewhere.
Just as importantly, the process integrates well with the advisory relationship. A robust technology platform and direct communication between the mortgage team and our office allow us to stay involved throughout the process—helping evaluate loan options, coordinate assets and make sure the mortgage decision fits within the client’s broader financial plan.
Borrow Without Selling Your Investments
Another option available to many Schwab clients is a Pledged Asset Line (PAL), which allows you to borrow against eligible non-retirement investments without having to sell them.
PALs can be useful for larger expenses such as a home purchase, business startup capital, college tuition, tax payments or other temporary liquidity needs.
But one of their most valuable uses is simply bridging a timing gap.
Tuition may be due in the fall while your annual bonus doesn’t arrive until December. You may purchase a home in the spring with a large stock vest coming in the summer. Or you may have a tax payment due before another expected source of cash becomes available.
Instead of selling investments at an inconvenient time—and potentially realizing capital gains—a PAL can provide temporary liquidity until the expected cash arrives.
PAL borrowing rates can also be considerably lower than traditional brokerage margin rates, making them worth considering when borrowing against an investment portfolio.
Liquidity as Part of the Plan
Borrowing against investments isn’t appropriate in every situation. PAL rates are variable, pledged investments can decline in value, and additional collateral or repayment could be required.
But used thoughtfully, these borrowing options can make your investment relationship more valuable than simply managing a portfolio. The goal isn’t to take on more debt—it’s to have more options when the timing of your assets and expenses doesn’t line up.
If you’re considering a home purchase or anticipate a large cash need, let us know. We can help evaluate the available options and determine how they fit within your broader financial plan.
Note: This article was prepared with the assistance of AI-based drafting and research tools. The ideas, analysis, and conclusions reflect the views of Blue Haven Capital and were reviewed prior to publication.
