High-Net-Worth Lending
Pledged Asset Mortgages, Explained
How sophisticated borrowers use a securities portfolio as additional collateral to avoid PMI, avoid liquidating appreciated stock, and sometimes finance up to 100% of the purchase price.
Quick answer
A pledged asset mortgage lets you pledge a portion of your taxable brokerage account as additional collateral so you can take a low or zero down payment without PMI and without selling appreciated securities. The pledge releases once the loan pays down to an unsupported LTV threshold.
What a Pledged Asset Mortgage Is
A pledged asset mortgage is a real first-lien mortgage on a property, with one addition: a portion of your securities portfolio is pledged to the lender as supplemental collateral. The securities stay in your name in a brokerage account. The lender records a control agreement that restricts withdrawal of the pledged value until the pledge is released.
The function of the pledge is to substitute for the down payment that would otherwise be required. Because the lender has collateral exceeding the conventional LTV cap, PMI is not required, and in some programs you can finance 100% of the purchase price.
How It Works
Typical structure: you buy a $2M home with a $2M first-lien mortgage. You pledge roughly $400K to $600K of marketable securities (depending on the lender’s advance rate against your specific asset mix). The home is the primary collateral. The pledged securities are the supplemental collateral.
You make a normal monthly principal and interest payment on the mortgage. The pledged securities continue to earn dividends and appreciate in your account. When the unpaid principal balance plus any pledge release threshold is satisfied (commonly when the loan reaches 80% LTV through paydown or appreciation), the pledge releases and the securities are unrestricted.
Why Sophisticated Borrowers Use This
Avoid realizing capital gains
Selling $400K of appreciated stock to fund a 20% down payment can trigger six figures of capital gains tax. Pledging that same stock keeps the position intact and avoids the tax event entirely.
Eliminate PMI at lower down payments
The pledged collateral substitutes for the conventional 20% down threshold, so PMI is not required even though the cash down is less than 20%. On a $2M loan, that can save hundreds of dollars a month.
Keep capital invested
Pledged securities continue to participate in market returns. If your long-run expected return on the portfolio exceeds the after-tax mortgage rate, leaving the money invested is the rational decision and the pledge is the mechanism that allows it.
Preserve diversification
Liquidating to fund a down payment can leave the remaining portfolio more concentrated in whatever you did not sell. Pledging preserves the original allocation.
Real Tradeoffs
Pledge call risk
If the pledged portfolio drops below the required value, the lender can demand additional collateral. In a deep drawdown you may need to add securities, deposit cash, or pay down principal. This is the central risk and is the reason a diversified portfolio is a hard requirement.
Eligibility restrictions on the portfolio
Concentrated single-stock positions, employer stock above a stated percentage, restricted stock, options, and most illiquid holdings are typically ineligible or eligible only at a deep haircut. A broad portfolio of marketable equities, ETFs, mutual funds, and investment-grade bonds is what these programs are designed around.
Pledge release timing
The pledge ties up the supplemental collateral until the LTV threshold is met. In a flat or declining market, paydown is the primary path to release. Plan for the pledge to be in place for several years.
Limited lender availability
Pledged asset mortgages are a niche product. Not every wholesale lender offers them. Pricing and structure differ by lender, so a side-by-side comparison matters even within the small set that does this.
Eligible Securities and Restrictions
Typical eligibility for pledged collateral is built around marketability and diversification:
- -Generally eligible: broad-based U.S. equity ETFs, mutual funds, individual large-cap stocks within position limits, investment-grade corporate bonds, Treasuries, and similar marketable securities.
- -Generally ineligible or limited: employer stock above a concentration threshold (often 10% to 25% of the portfolio), restricted stock, ISO and NSO grants, options, single-stock concentrations above lender limits, illiquid private holdings, crypto.
- -Account type: taxable individual, joint, revocable trust accounts. IRA, 401(k), and other tax-qualified accounts are typically excluded.
How Much Can You Pledge?
The pledge requirement is set as a percentage of the down-payment gap, not the full loan amount. A common structure is 100% to 130% of the gap for a diversified equity portfolio, higher for portfolios concentrated in single-stock or higher-volatility holdings.
Example: a $2M home with no cash down requires the lender to cover the entire $400K that would normally be the 20% down payment. With a 130% pledge ratio, that is $520K in eligible securities. Different lenders apply different advance rates to different asset classes (for instance, lower advance on individual stocks than on broad ETFs), so the final number depends on the actual portfolio.
Example Scenarios
Scenario 1: avoid PMI on a $1M home
Purchase $1M, want to put 10% down instead of 20%. Normally PMI applies on a conventional loan above 80% LTV. Pledge roughly $120K of diversified securities and you can take a $900K loan with no PMI and no points paid. Keeps $100K invested instead of sold for the down payment.
Scenario 2: 100% LTV on a $3M home
Purchase $3M with 0% cash down. Lender requires a pledge covering the full $600K equivalent of 20% down, plus a cushion. Typical pledge in this scenario runs $650K to $900K of marketable securities depending on portfolio mix. The borrower keeps their portfolio invested and finances the entire home.
Scenario 3: HNW with $5M brokerage, $2.5M purchase
Borrower has a $5M diversified brokerage account and does not want to sell into appreciated positions to fund a $2.5M home purchase. Pledge roughly $500K to $650K of the account against a $2.5M first lien. Avoids the tax event entirely, keeps the portfolio earning market returns, and the pledge releases as the loan pays down to the program’s release threshold.
Frequently Asked Questions
Can I trade in the pledged account?+
Usually yes within limits. The lender places a control agreement on the account, but the account remains in your name and you can typically continue to trade within the lender’s eligibility rules. Concentrated positions, options, and short positions are generally restricted. Specifics depend on the lender and the brokerage agreement.
What happens if my portfolio drops?+
If the pledged value falls below the required threshold, the lender will issue a call for additional collateral. You either deposit additional eligible securities, deposit cash, or pay down the mortgage principal to restore the required pledge ratio. If you do not meet the call, the lender can sell pledged securities to cure the deficit. This is the primary risk of the structure and is why a diversified portfolio is required.
How is this different from a margin loan?+
A margin loan is a revolving line against your brokerage account at a floating rate, callable at the broker’s discretion, used for any purpose. A pledged asset mortgage is a real fixed mortgage on a property where the securities serve as additional collateral alongside the home. The mortgage rate is typically fixed for the term, and the loan is not callable in the margin sense - only the pledge requirement is.
Are retirement accounts eligible?+
Generally no. IRA, 401(k), and other tax-qualified retirement accounts cannot be pledged because of ERISA and tax code restrictions. Eligible accounts are typically taxable brokerage accounts, trust accounts holding marketable securities, and certain managed accounts. A few lenders have niche programs that recognize retirement assets through a separate analysis, but the securities themselves are not pledged.
When does the pledge release?+
Most programs release the pledge automatically once the unpaid principal balance reaches a stated LTV threshold (commonly 80% or below) through a combination of paydown and property appreciation. Some programs require a borrower-initiated request and a re-appraisal. Once released, the securities are unrestricted.
Is the interest deductible like a regular mortgage?+
For acquisition indebtedness on a primary or secondary residence, mortgage interest is generally deductible subject to the standard limits in the tax code. The pledge structure itself does not change that. As always, talk to your tax advisor for your specific situation.
Can I pledge crypto?+
Generally no through traditional pledged-asset mortgage programs. Crypto is typically excluded because of volatility, custody complexity, and lender eligibility rules. Specialty crypto-backed lending exists separately, but it is a different product with very different risk and pricing.
Price a pledged asset mortgage
Pledged asset programs are not priced through the standard residential pricer. Email us with your scenario - loan size, target down payment, and rough portfolio composition - and we will run it through lenders that offer this structure.
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Rates, eligibility, and program guidelines vary by lender and are subject to change. This page is general educational information and is not a commitment to lend or an offer of credit. Tax and investment strategy implications should be discussed with your own financial, tax, and legal advisors. Equal Housing Opportunity.