Stop using traditional mortgages at 7% to buy real estate!

There’s a huge listed options market sitting right next to your brokerage account that can be used to lower your effective borrowing cost and keep your portfolio invested.

Here’s how it works:

• Take part of your home financing the traditional way (conforming or jumbo mortgage).

• Finance the other part using a synthetic loan (box spread) at something closer to Treasury yields.

• Blend the two into a single “hybrid” borrowing rate, often meaningfully lower than doing 100% with the bank.

Simplified example:

• Bank mortgage rate: 6.8% (interest deductible up to the current mortgage interest cap, e.g., $750k of acquisition debt)

• Box spread financing: 4.2% equivalent rate (interest deductible as capital losses with no limit)

• 50 / 50 split → blended cost around 5.5%, with more transparency and fewer junk fees or commissions

For buyers looking at mortgages above the deductible cap, a hybrid approach can:

• Maximize deductible mortgage interest
• Create capital losses that can offset gains in the portfolio
• Keep more of your investments compounding instead of tied up as home equity

If you’re considering a large mortgage and have a substantial portfolio, it’s worth asking:

Should I really be borrowing 100% from the bank, or is there a smarter way to structure this?