“Customers will be able to apply for these loans in a more streamlined fashion than they do today,” Kerr said.
She declined to name the company Schwab will be working with but she said a deal is imminent. Clients will be able to apply for a loan through this portal and make adjustments to it as well.
Not only does a potential home buyer want to make any offer without any conditions, they also want to be sure that they can provide the funds that the seller is asking. If there are multiple bids for a home and a person really wants that home, they will want to have access to a line of credit as soon as possible.
Mullin said securing an LMA takes no more than 48 hours. Most traditional 30-year loans take weeks depending upon the institution and a person’s cooperation. Kerr explained that a Schwab loan can take 10 to 14 days, while a standard mortgage can take up to 45 days.
“It’s much easier to get a securities-based loan than it is a mortgage,” said Dan Duca, associate director at Altfest Personal Wealth Management in New York City. "It’s less onerous than a mortgage.”
Duca said that he has been seeing the trend slowing down as of late after it had initially began getting hot in October, although he admitted he based that on a small sample size.
Kerr has seen the opposite. In fact, she said that as more people start to learn about these loans and their flexibility, they are becoming a more attractive option, she said.
“We are starting to see an uptick of them on the retail side,” she said.
While securities-based loans have their advantages for short-term options when buying a home, there are disadvantages for using them as well. The primary one is their variable rates. The amount a borrower agrees to at the outset of the loan could change rather dramatically over the course of weeks and months, whereas a mortgages offer the option of a fixed rate.
In addition, if there are any dramatic changes made to the assets used as collateral, such as a person selling a portion of those assets or their value drops in a down economy, that could also force a margin call on the loan.
In terms of the type of client these loans are ideal for, there is no one-size-fits-all model and depends on individual cirumstances, Mullin said.
Maksimovich sees it as a viable option for business owners who are involved in an acquisition and do not want a long-term lending option.