Private Banking: What is a Portfolio Loan?

Investec Private Banker Samy Latif answers some of the commonly asked questions about portfolio loans and explains how this approach to lending could help you achieve your financial goals.

What is a Portfolio Loan?

A portfolio loan is an on-demand facility which enables clients to borrow funds in a fast and flexible way. The loan is typically secured against the value of an investment portfolio. For clients of Investec Wealth & Investment (IW&I) the loan would be secured against their Discretionary Portfolio held with IW&I, which may include general investment accounts, ISAs and offshore bonds.

When can a Portfolio Loan be used?

Individuals might borrow against their portfolio for many different reasons including:

  • – The purchase of property (including owner-occupied, investment and commercial properties)
  • – To gift or loan monies to children
  • – To invest in a business
  • – To purchase a luxury item
  • – To refinance existing borrowing
  • – To re-invest back into the investment portfolio

Requests are always considered on a case-by-case basis.

What are the potential advantages of using a Portfolio Loan instead of liquidating investments?

A portfolio loan could allow you the freedom to access funds without triggering an immediate tax liability from the sell down of the portfolio. Should you have a funding need, by borrowing instead of withdrawing from the portfolio your portfolio remains intact, thereby potentially benefiting from upward market movement and continued yield. With interest rates at historic lows, many clients are viewing this as a good time to borrow.

Portfolio loans can be easy to arrange and there are no early repayment charges. An arrangement fee and legal fees may apply.

What kind of investment portfolio is eligible?

Some banks have different criteria in terms of eligible assets that they will lend against in an investor’s portfolio.  In the majority of cases, Investec lends against discretionary portfolios. In some circumstances, advisory portfolios are also accepted.

At Investec we are able to lend against General Investment Accounts, ISAs and Offshore Bonds where the investment is managed by IW&I. Security can be in individual names or in the name of a special purpose vehicle.  We don’t lend against pensions (such as Self-

Invested Personal Pensions).  In order to take out a portfolio loan, your investment portfolio must be under the management of Investec Wealth & Investment.

To qualify you must also meet the Consumer Credit Act (CCA) High Net Worth exemption; in order for this exemption to apply you must:

  • – Hold net assets of no less than £500,000 and/or
  • – Have earned, net of national insurance contributions and income tax, no less than £150,000 during the previous financial year

Other credit and lending criteria also apply.

Can I transfer my portfolio or existing portfolio loan to Investec Wealth & Investment?

Investec has assisted a number of clients who have wished to move their portfolio to IW&I and where there is an existing loan secured against the portfolio held by the incumbent institution. Our teams will work closely with your existing provider to ensure the process is as smooth as possible.

Depending on your circumstances, costs associated with transferring your portfolio to IW&I may apply.

Are there any other considerations to bear in mind?

It’s important to remember that the portfolio loan is an on-demand facility and Investec can legally demand repayment of the loan at any time, for example where the agreed loan to value maximum is exceeded.  You should check with your bank or lender what their lending terms as these may not all be the same.

What Can Investec Offer?

Our portfolio loan offering allows clients to borrow for any legal purpose. The minimum loan is £500,000 (£100,000 where the loan proceeds are used to re-invest back into the IW&I portfolio). Funds can be drawn in Sterling, Dollars or Euros and you can choose to repay the loan at any time without penalty.

We would be delighted to explain our Portfolio Lending offering in more detail. Once we’ve received all of the relevant information from you, you should be able to receive a decision on your application in a matter of days. If you’d like to know more, please get in touch with your Adviser at GSB Capital.

Samy Latif

Samy is a Private Banker at Investec

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