The Quick Read: The only way to use stocks for a down payment without selling them is to borrow against the portfolio, then bring the borrowed cash to closing. Unsold shares alone do not count as cash to close. Whether the borrowed money is accepted depends on the DSCR program, so you confirm that before you draw a dollar.
- Unsold stocks can count as post-close reserves on some files. They do not become cash to close.
- A securities-backed line of credit (a revolving loan secured by your investment accounts) is the main route that avoids a sale.
- Many programs in Lendmire’s wholesale network accept documented borrowed funds. Some cap the borrowed share, and borrowed money often cannot cover reserves.
- A market drop can force a sale anyway, so size the draw conservatively.
- Purchase leverage typically runs 75%-80% LTV, so the equity you need is still 20%-25% down on most files.
You have a brokerage account full of appreciated stock. You also have a rental you want to buy. Selling the shares feels wrong, because the sale may trigger a tax bill and takes you out of the market. This explainer walks through how the borrowing route works, how a DSCR file treats it, and where it breaks. For the broader picture, the complete DSCR loans guide covers how these loans work from the ground up.
DSCR Calculator
Run the numbers in your market
Rate source: Freddie Mac 30-yr average via FRED® — Federal Reserve Bank of St. Louis · effective Oct 15, 2026
Prefilled with starting assumptions — enter your own rent or nightly figures, taxes, insurance, and HOA for a more accurate picture.
Program parameters update from Lendmire’s centralized guideline source. Taxes and insurance are editable estimates.
As of Oct 15, 2026 · General Freddie Mac market benchmark, not a Lendmire loan offer. Rent, nightly rate, occupancy, taxes, and insurance are editable estimates. Short-term rental figures are estimates only and vary significantly by season, property type, management approach, and local short-term-rental rules — confirm local regulations before relying on them. Qualifying income for short-term rentals varies by program — some use appraisal market rent, others use documented STR history or projections — and is confirmed in underwriting. Not a Loan Estimate, approval, or commitment to lend. Program availability and eligibility are subject to lender guidelines, credit approval, property review, and underwriting.
Key Terms Defined
DSCR (debt service coverage ratio): The monthly rent divided by the full monthly housing payment on the property (principal, interest, taxes, insurance, and any HOA dues).
LTV (loan-to-value): The loan amount as a percentage of the property’s value or price. A 75% LTV purchase means 25% down. Leverage, reserves, and pricing vary by lender and program; the final terms follow the full file review.
Securities-backed line of credit (SBLOC): A revolving credit line secured by stocks, bonds, and funds you hold in a taxable investment account. You pay interest only on what you draw.
Margin loan: A loan from your brokerage, secured by the securities inside that same account.
Reserves: Liquid assets left over after closing, usually measured in months of the property’s payment.
Cash to close: The down payment plus closing costs, which must be liquid and in your account.
Maintenance call: A demand from the lender to add collateral or repay when the pledged securities fall in value.
Do Unsold Stocks Count as a Down Payment?
No. A brokerage statement proves you have assets, but a down payment has to arrive as cash. Shares you still own generally count, if at all, as post-close reserves.
This is where many investors get tripped up. DSCR loans qualify primarily on property-level rental income covering the payment, subject to lender guidelines. That does not mean the lender ignores your assets. Across our wholesale network, files still document where the down payment came from, and statements for the accounts used to close or to satisfy reserves get reviewed.
So a large stock account helps in two ways. It shows you can absorb a bad month. And on some programs, a haircut version of the balance can satisfy part of the reserve requirement. A haircut means the lender counts only a discounted portion of the balance, because prices move. How big the discount is varies by lender.
Neither effect puts cash in escrow. For that, you either sell or borrow.
How Does Borrowing Against Stocks Work?
You pledge your taxable-account holdings to a bank or brokerage and receive a credit line. You draw cash, move it to your own bank account, and use it for the down payment. Your shares stay invested.
FINRA describes an SBLOC as a revolving line of credit secured by securities in your investment accounts. Two practical limits matter for a real estate buyer:
- Eligible collateral. Fidelity’s SBLOC page lists individual stocks, bonds, mutual funds, ETFs, and core cash in non-retirement accounts. Retirement accounts do not qualify.
- Permitted use. Real estate purchases are an allowed use. Schwab’s overview of borrowing against assets notes that SBLOC proceeds generally cannot buy securities or be deposited into a brokerage account. That is fine here, because you want the cash in a bank account.
Minimums and borrowing limits are set by each bank and brokerage, so they differ by institution. Some require a minimum pledge before the line opens.
A margin loan is the sibling product. It sits inside the brokerage account itself. The mechanics and the risk rules differ, which the edge cases section covers.
Will a DSCR Lender Accept Borrowed Down Payment Funds?
Often yes, but it is program-specific. This is the gating question, and you settle it before you open any line.
Many programs in Lendmire’s wholesale network accept borrowed down-payment funds when the source is documented. Some cap the borrowed share. Borrowed money frequently cannot be used to satisfy reserves. A few programs want the down payment to come from your own seasoned funds. A broker who sees many lenders’ guidelines can steer the file to a program that accepts the structure, so you do not draw on a line and then find the loan program rejects it.
Questions to ask up front:
1. Are borrowed funds allowed for the down payment on this program?
2. Is there a cap on the borrowed share?
3. Can borrowed funds count toward reserves, or only toward cash to close?
4. What documents does the underwriter want for the draw?
Treat down payment, closing costs, and reserves as separate pots. Borrowed money may be accepted for one and refused for another.
What the Underwriting Trail Looks Like, Step by Step
The file needs a clean paper trail from the line, to your account, to escrow. Here is the sequence that works.
1. Pre-clear the DSCR program. Get answers to the four questions above in writing from your broker.
2. Open the credit line. The line is limited by the value of the pledged collateral and by the institution’s own rules.
3. Draw and move the money to your own bank account. Do not send it straight to escrow from the brokerage. A deposit you can trace is easier to document.
4. Keep every statement. That means the draw confirmation, the bank statement showing the deposit, and the credit report showing the new liability.
5. Separate the pots. Confirm the down payment and closing costs are covered by the draw or other seasoned cash, and that reserves remain.
6. Underwriter review. The lender looks at large deposits, the source of funds, and whether the program permits borrowed money.
The loan’s own rules still apply in full. Purchase leverage typically runs 75%-80% LTV on investment property, and select high-leverage programs reach 85% LTV with roughly a 700+ score. Most programs want a credit score around 660, though a 620 floor exists in parts of the network. Reserves commonly run about 6 months of PITIA (the full monthly payment: principal, interest, taxes, insurance, and HOA), and about 9 months above $1,500,000, though conservative files can see them waived. All of it is subject to lender guidelines, and each file is underwritten individually.
A Worked Example (Percentages and Ratios Only)
Picture an investor buying a duplex at 75% LTV on a purchase, so 25% down. The property’s rent clears roughly 1.2x coverage against its own PITIA. On paper that is a strong file for a program that starts coverage at 1.00, since stronger ratios open better pricing and leverage. Terms vary by lender guidelines, property type, leverage, credit profile, and full file review.
Now the investor funds the 25% down plus closing costs with an SBLOC draw. The DSCR calculation compares rent to the property’s PITIA only. A line secured by your portfolio generally sits outside that ratio. But your real cash flow still absorbs the line’s interest, and it comes out of the same rent.
So the file can show 1.2x coverage while your actual monthly picture is thinner. Clearing 1.00 is not the same as positive cash flow. Repairs, vacancy, management, utilities, and capital expenses all sit outside the DSCR calculation, and so does the credit-line payment.
That is the double-count to avoid. The rent has to cover the mortgage, the line, and the surprises.
DSCR vs. conventional financing
There are two common ways to finance an investment property, and they qualify you differently — here’s how investors weigh them.
Why investors choose it
- Qualifies on the property’s rental income — no personal tax returns, W-2s, or pay stubs needed to document income.
- No personal debt-to-income ceiling to clear, so existing mortgages and obligations don’t cap your borrowing the same way.
- Can be closed in an LLC, keeping the property inside a business entity.
- Built for scaling — not held to the limit on number of financed properties that conventional financing applies.
- Underwriting centers on the deal: generally qualifies when the rent covers the payment, a 1.00x coverage ratio being a common baseline (confirmed in underwriting).
- Designed specifically for investment property, including long-term and, where the program allows, short-term rentals.
Where it’s strong
- Often the lowest ongoing financing cost for a buyer who fully qualifies on personal income — a fit for a first property or a cost-first purchase.
Trade-offs for investors
- Requires full personal income documentation and must fit within a debt-to-income limit — salary, existing debts, and other mortgages all count.
- Typically held in your personal name rather than a business entity.
- Caps how many financed properties you can carry, which can become a ceiling as a portfolio grows.
- Evaluates you as a borrower as much as the property, which usually means more paperwork.
How investors usually choose: a first or single property often optimizes for the lowest financing cost; portfolio builders often optimize for leverage, vesting in an LLC, and scaling past conventional caps. The right answer depends on your goals, the property, and current guidelines — both paths run through select lenders in Lendmire’s wholesale network, with eligibility and terms confirmed in underwriting.
Sell, Borrow, or Mix: How the Options Compare
| Factor | Sell shares | Portfolio line (SBLOC) | Margin loan |
|---|---|---|---|
| Stays invested | No | Yes | Yes |
| Triggers a sale | Yes | Not by itself | Not by itself |
| Collateral risk | None | Maintenance call risk | Maintenance call risk |
| DSCR cash to close | Liquid proceeds | Needs lender approval | Needs lender approval |
Selling is simple. The proceeds are ordinary liquid funds. But a sale produces a capital gain or loss. IRS Topic 409 explains that the gain is long-term if you held the asset more than one year and short-term if you held it one year or less. NerdWallet’s SBLOC explainer adds the timing point: selling in a bear market can lock in a loss, and selling in a strong market may produce a gains bill.
Borrowing sidesteps both, for now. It defers the decision rather than erasing it. Tax treatment varies; consult a qualified tax professional before relying on any outcome.
The stronger play for many investors is a mix. Sell a slice of lower-gain shares, borrow a modest amount against the rest, and keep a real cushion in the account. It is a genuine toss-up between selling and borrowing for anyone near a long-term holding threshold. The right answer depends on the gain, the holding period, and how much market risk you want stacked on top of a rental.
Where the Plan Breaks: Edge Cases
Pledged shares as reserves. Once shares secure a line, they are encumbered. Underwriters may refuse to count them, or count them at a reduced value. Policy varies by lender, so confirm it before you assume the same portfolio can both secure the line and satisfy reserves. Plan reserves from assets you have not pledged.
Maintenance calls. The SEC and FINRA investor alert on SBLOCs explains that if collateral value falls too far, you get a maintenance call. The alert gives a typical window of two or three days to post collateral or repay. After that, the firm can liquidate your securities. A market drop can therefore force a sale, a taxable one, while you hold the rental.
Margin-account rules. FINRA’s margin disclosure says a firm can sell your securities without contacting you, you do not choose which securities are sold, and the firm can raise its house requirements without advance written notice. FINRA’s brokerage account guidance cites a 50% initial margin limit under Regulation T and a 25% minimum maintenance equity for margin accounts. Those are margin-account figures. SBLOC limits are set by the bank and brokerage, so do not assume the 25% number applies to a credit line.
Concentrated or volatile holdings. Forbes notes that highly volatile assets raise risk and can affect eligibility, and that the lender may be able to demand payment at any time depending on collateral value. A portfolio that is mostly one stock is a fragile base.
Retirement accounts. They may count toward reserves under lender-specific rules, but they cannot be pledged for a SBLOC.
Layered risk. You end up with a leveraged rental and a leveraged portfolio, and both are exposed to the same market. Forbes calls an SBLOC a reasonable short-term bridge but says it may not suit most investors over the long run.
Across files like these, the ones that go wrong tend to share a pattern: the draw is sized to the maximum, the cushion is thin, and there is no plan for a market dip between draw and closing. Draw less than the line allows.
Is Borrowing Against Stocks Right for Your File?
It fits when you hold diversified, liquid positions in a taxable account, you have significant unrealized gains, and the rental’s coverage is strong enough to absorb a line payment. It also fits as a short bridge, where you plan to repay the line from a refinance or other proceeds.
It fits poorly when your portfolio is concentrated, your cushion is thin, or the DSCR program you want rejects borrowed funds. Then selling a portion, or tapping another source, is the cleaner path.
Other sources exist, and they work on the same logic of documenting where the money came from. If you already own an LLC-held portfolio, see Lendmire’s article Can an LLC Portfolio Operator Use DSCR Cash-Out Proceeds as a Down Payment?. LLC-titled borrowing is subject to lender program eligibility.
Remember that a bigger down payment can lower the monthly payment and lift coverage. It does not erase leverage caps, credit floors, reserve rules, or property eligibility. The strongest files clear both tests: enough equity and enough rental coverage.
Frequently Asked Questions
Can I use stocks as reserves instead of cash?
On some programs, yes, usually at a discount to the balance. Reserves are measured after closing, so unsold shares may help there even though they cannot serve as cash to close. If the same shares secure a credit line, the lender may refuse to count them or may reduce their value. Confirm the treatment before you rely on it.
Does the credit line change my DSCR?
Generally not. The ratio compares rent to the property’s own payment. A line secured elsewhere sits outside that calculation. Your personal cash flow still absorbs the line’s payment, though, and the lender may see the new liability on your credit report. Clearing 1.00 does not mean positive cash flow.
Does borrowing against stocks avoid taxes?
It avoids a sale, so the draw itself is not a taxable gain. FINRA and the SEC warn of potential unintended tax consequences, and the usual trigger is a forced liquidation after a market drop. Tax treatment varies; consult a qualified professional.
What if the market drops after I draw?
You may receive a maintenance call and have only a couple of days to add collateral or repay, according to the SEC and FINRA alert. If you cannot, the firm can sell your holdings without asking which ones. Keep the draw well below the line’s limit and hold extra cash outside the pledged account.
Is there a truly zero-down DSCR purchase?
Do not count on one. Typical purchase leverage is 75%-80% LTV on investment property, with select programs reaching 85% LTV. Borrowed money can fund that equity on programs that allow it, but the equity requirement itself remains. Coverage below 1.00 is available through select lenders in the network, with leverage and terms adjusted. Exact terms depend on the lender’s guidelines, property type, leverage, and a full review of the borrower’s file.
If You Are Ready to Run the Numbers
If you are buying or refinancing a rental property and want to see how the numbers work, Lendmire can help you compare DSCR loan options based on the property income, credit profile, leverage, and investor goals. Call 828-256-2183 or request a quote through the site, and Lendmire, a DSCR-focused mortgage broker, will check borrowed-funds rules across its lender options before you draw on anything. Programs change, qualification is subject to lender guidelines. This is not a commitment to lend.
One last thing to settle before you draw: the lender’s answer on borrowed funds, in writing.
About Lendmire
Lendmire is a DSCR-focused mortgage brokerage, NMLS# 2371349, placing investor loans across 41 markets, including Washington, D.C. DSCR eligibility is generally reviewed by the lender around a property’s rental income rather than personal income documentation, which fits LLC-held rentals, self-employed investors, and portfolios scaling past conventional financed-property limits. Scotsman Guide named Lendmire a Top Mortgage Workplace in both 2025 and 2026.
Get Started
Ready to find the right loan for you?
In about 30 seconds you can review financing options available for your investment property. No commitment required.
Informational only. Not a Loan Estimate, approval, or commitment to lend. Program availability and eligibility are subject to lender guidelines, credit approval, property review, and underwriting.
References
1. FINRA: Securities-Backed Lines of Credit
2. Fidelity: Securities-Backed Line of Credit
3. Schwab: 3 Ways to Borrow Against Your Assets
5. NerdWallet: Securities-Based Line of Credit
6. SEC/FINRA Investor Alert on SBLOCs (investor.gov)
7. FINRA Rule 2264: Margin Disclosure Statement
8. FINRA: Brokerage Accounts and Margin
9. Forbes: Using an SBLOC to Buy a Home
This article is part of Lendmire’s DSCR loan program — full qualification details, guidelines, and scenarios live on the program page.
Related reading: How to Fund a First Airbnb Down Payment With a HELOC and DSCR Loan · 30-Year vs. 40-Year DSCR Term: Which Is Better · Fixed vs ARM on a DSCR Loan: Which to Choose
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
- Mortgage Loan Originator · NMLS# 1129696 · Verify on NMLS Consumer Access
- North Carolina Real Estate Broker · License# 343312 · Verify on NCREC
- North Carolina Insurance Producer · License# 19053198 · Property, Casualty, Life, Health · Verify on NAIC SBS
- Lendmire LLC · Firm NMLS# 2371349 · Verify firm licensure
Required disclosures. Lendmire (NMLS# 2371349) operates as a licensed mortgage broker, not a direct lender or depository. The discussion in this article is general in nature and should not be relied upon as financial, legal, or tax advice — every investment scenario is unique and should be reviewed by a qualified professional. Any loan inquiry is subject to lender underwriting, and this article is not a commitment to lend or a guarantee of approval. Mortgage rates, loan terms, and program guidelines vary by borrower, property, and state, and may change without notice. Equal Housing Opportunity. Verify licensure at NMLS Consumer Access.