Friends,
The topic we wanted to touch on this week relates to the advantages that a security-backed line of credit or a home-equity line of credit may provide. These loans, commonly referred to as an SBLOC and HELOC, can be utilized to access credit for a number of reasons that benefit the borrower. SBLOCs are opened with the securities in a retail account (non-retirement) serving as the collateral for the loan. HELOCs utilize a home or rental property as the collateral and the loan amount is tied to the equity accrued in the home.
Some noteworthy features for individuals regarding SBLOCs and HELOCs:
- Tax Benefits of Borrowing:
- Perhaps the biggest benefit of using an SBLOC loan are the tax savings compared to liquidating your brokerage account and incurring capital gains tax.
- Flexibility of Use:
- Both SBLOCs and HELOCs are non-purpose lines of credit, meaning that there are few restrictions one can use the funds for.
- Interest Deduction for HELOCs:
- In some cases, you may be able to deduct your HELOCs annual interest costs on your federal tax return. This is only the case if you use the borrowed funds to buy, build, or substantially improve your home.
To find out more about SBLOCs and HELOCs see the links below or reach out to us!
Matt and Andrew
Sources:
SBLOC 101: Guide to Securities-Based Lines of Credit | Regions Bank
Using A Securities-Backed Line Of Credit To Buy A Home (forbes.com)
HELOC Pros and Cons: Should You Get a Home Equity Line of Credit in 2024? (businessinsider.com)