Hybrid mortgages are catching 🔥🔥🔥

We’ve been working with families that have large stock portfolios ($5M+) to borrow against their portfolios through box spreads at rates around ~4%.

Here’s the idea:

Say you’re buying a $2M home.

Traditional approach:

• 20% down = $400k

• $1.6M mortgage at 6.75%

• Annual interest cost ≈ $108k

Not ideal.

Instead, we can potentially:

• borrow $1M against the investment portfolio at ~4%

• make a larger down payment

• and only need a $600k traditional mortgage

The new math:

• $1M @ 4% = ~$40k

• $600k @ 6.75% = ~$40.5k

Total annual interest cost:

≈ $80.5k

That’s roughly $27.5k/year in savings.

The financing cost on box spread loans is generally realized as capital losses, which can offset capital gains and improve tax efficiency when diversifying appreciated portfolios.

If you really want to optimize the structure, you could even consider maintaining a ~$750k traditional mortgage to maximize mortgage interest deductibility and financing the remainder through box spreads.

That way, the entire debt stack may be tax deductible.

Obviously these structures are not appropriate for everyone and introduce additional complexity/risk, but for sophisticated investors with large taxable portfolios, they can materially improve after-tax outcomes.