How Does High-End Real Estate Financing and Asset Financing Work

How Does High-End Real Estate Financing and Asset Financing Work for Luxury Homes?

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How Does High-End Real Estate Financing and Asset Financing Work for Luxury Homes?Photo From Adobe Stock

Originally Posted On: https://www.shearwateraero.com/how-does-high-end-real-estate-financing-and-asset-financing-work-for-luxury-homes/

 

Are you in the market for high-end real estate but prefer not to use a traditional credit-based lender? If so, asset financing could be the key to taking possession of that Rocky Mountain hideaway or that horse ranch in Brazil. Keep reading to uncover the secrets of how high-end real estate financing works.

What is High-End Real Estate Financing?

Luxury asset financing for high-end real estate allows you to obtain the necessary funds to purchase your desired property based upon the value of your current assets. For example, one of our clients might wish to own an Italian villa. Unfortunately, she’s not in a position to make an outright cash purchase. However, hanging on the walls of her primary residence are several sought-after artworks with a collective value of several million dollars.

She could offer her art collection as collateral for a loan that would give her the ability to buy the new property. Ideally, the loan value for the art would match or exceed the price needed to obtain the villa. This would eliminate the need for the owner to disturb her limited cash reserves in order to close the deal.

How Asset Financing Works

Traditional lenders decide whether to loan money based upon the applicant’s credit history. However, some people with high net worth may not have the kind of credit track record to interest a bank in offering a loan.

On the other hand, that individual or his business might own property and equipment worth a considerable amount of money. That’s where an asset lender comes into the picture.

An asset lender usually isn’t interested in an applicant’s credit history. Those that do consider credit don’t accord it as much weight in their decision as do traditional lenders. Instead, they base their loan decision on the value of the collateral. So, a business or an individual with a less than stellar credit history could still receive a loan.

The Advantages of Asset Financing

It’s easy to understand why someone would choose asset lenders if a bank loan was unavailable, but why would someone prefer an asset loan even if they could get money from a bank? There are several good reasons.

Liquidity and Speed

Assets such as a 1955 Mercedes 300 SL Gullwing sports car have an instantly recognizable value. An asset lender would be immediately interested in loaning money against such a historic vehicle. Once the condition and value of the proposed collateral have been established, you can receive your loan relatively quickly. In most cases, the asset lender could agree to put money in your hands faster than many traditional financial institutions could even review your paperwork.

Speed can be of special importance in high-end real estate financing if that certain property suddenly and unexpectedly becomes available. The potential buyer who is quickest to arrange his funding is usually the winner. If you’re using an asset lender and your rivals are using banks, there’s every reason to believe that soon you’ll be the new owner of that property.

Tax Considerations

Why wouldn’t the owner of a valuable asset who’s in need of money simply sell the item? After all, presumably, a sale could mean that he could pocket 100% or more of the asset’s current market value? In contrast, a loan against the item would represent less than 100% of its value.

He may base his decision on tax considerations. A calculation of the taxes due upon the sale of the item may make the owner think twice, especially, if the item has appreciated while in his possession.

With an asset loan, the owner can use a portion of the item’s value without worrying about negatively affecting his taxes. If the item has appreciated since he purchased it, that now works to his advantage. He’s able to borrow more money because the item has become more valuable.

No Credit Check

Typically, asset loans are possible without the need for a credit check. Too many credit checks in a short amount of time can damage your credit score. However, you could obtain several asset loans in quick succession without harming your credit standing.

Asset lenders are less interested in your creditworthiness than in the value of the item that you’re presenting as collateral. Asset lenders can ignore credit histories because asset loans are far safer for lenders due to the collateral.

It’s also unlikely that there will by any trace of your asset loan on your future credit reports. Therefore, asset loans can help you keep your financial life private.

Peace of Mind

Traditional loans can carry far more psychological pressure than does an asset loan. Take for instance a remortgage of your primary residence. The pressure can be tremendous as you contemplate the fact that your loan puts at risk the place that your family has called home for many years.

Asset loans are a different matter. Normally, your collateral is a true luxury. It’s not a necessity. True, you don’t want to take the matter lightly, but knowing that it’s a luxury leaves your mind free to focus on the positive things that the loan will accomplish for you and your family.

Which Assets Are Appropriate Collateral?

The luxury asset capital that a lender will accept as collateral differs according to each firm’s lending policies nevertheless, there are a few types of assets that are commonly used. Luxury asset lending typically uses the following:

  • Automobiles and trucks
  • Airplanes
  • Artwork
  • Yachts
  • Houses
  • Real estate
  • Commercial property
  • Equipment
  • Jewelry
  • Investment instruments such as stocks, bonds, and cryptocurrency
  • Precious metals
  • Collectibles and memorabilia such as comic books and movie costumes

Let Asset Financing Work for You

Do you have luxury assets that you could put to good use? Do you own exquisite pieces of jewelry or a magnificent, well-crafted yacht? Why not collect the value of those assets and use it to obtain that special high-end real estate you’ve always wanted?

Our team at Shearwater Aero Capital specializes in turning luxury items into needed funds that you can use for new purchases and investments. Contact us today and learn how simple it is to use what you already own to arrange for high-end real estate financing.

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