If you need a lump sum to buy a property, fund an opportunity, or create short-term flexibility, the obvious answer is often “sell some investments”. But for many people, selling isn’t just inconvenient; it can be expensive.
We often see situations where selling triggers a tax bill that feels avoidable, or where raising cash means dismantling carefully built tax wrappers. In those cases, it’s worth understanding an alternative: borrowing against an investment portfolio.
It isn’t right for everyone, and it needs to be handled carefully, but used appropriately, it can provide liquidity while keeping your longer-term plan intact.
What does “borrowing against your portfolio” mean?
In simple terms, it’s a loan secured against your investments. A bit like how a mortgage loan is secured against your property, this loan would be secured against shares, funds and ETF’s.
Rather than selling holdings to raise cash, a lender takes security over a portfolio and provides a facility up to a percentage of the portfolio’s value (the percentage depends on the assets and the lender).
You continue to own the portfolio, and it typically remains invested. The borrowing is then repaid over time or once a planned event happens – for example, a property sale is completed, or another cash inflow arrives.
This type of service is often associated with private banks (and rumour has it they often push such facilities for their own commercial gain), but it isn’t exclusive to them.
Managing tax and preserving wrappers
The most common motivation isn’t speculation. It’s preserving structure.
If a general investment portfolio has substantial unrealised gains, selling to raise cash can crystallise capital gains and trigger a tax bill – even if the intention is to reinvest later.
Alternatively, if most of your wealth is held in ISAs, selling investments to fund a purchase can solve an immediate issue but create a longer-term one. Once cash leaves the ISA, it becomes exposed to tax going forward, and you can’t necessarily rebuild that shelter quickly because of annual allowance limit being just £20,000.
Other structures (offshore bonds being an example) can also have tax consequences when funds are withdrawn. The detail varies, but the principle is consistent: sometimes the “cost” is less about interest rates and more about tax and wrapper losses created by selling.
A practical example: Buying a home without being stuck in a chain
Property is one of the clearest use cases.
Chains can dictate decisions, timing, pricing, and the pressure to compromise. If the money to buy is invested (especially inside wrappers or in portfolios with large gains), selling everything to raise funds can be a blunt solution. However, borrowing against your portfolio can provide a bridge to:
- Fund the purchase now
- Repay later (once the sale is complete/broader plan is ready)
The key is that the borrowing is being used for timing and flexibility, not as a permanent crutch.
Other reasons people use investment-backed lending
Beyond property, people tend to explore this approach when they want to:
- Fund a business purchase or buy-in without liquidating long-term holdings
- Cover a one-off cost while keeping their investment strategy intact
- Avoid being forced to sell at an unhelpful time
- Create flexibility around a planned move or transition
In each case, the theme is the same: access cash without breaking the structure you’ve built.
Do you have to use a private bank? Not always.
Private banks have offered lending against portfolios for years, even through external advisers like us, but facilities are often tied to moving assets onto their platforms. However, many clients value independent advice, they don’t want borrowing decisions to dictate where their investments sit and of course they may not want their hard earned money to be paying for the upkeep of the private bank’s ostentatious office space!
There are structures where lending can be arranged against a portfolio without requiring a wholesale transfer of assets. The specifics depend on the lender and the portfolio (and asset type), but the broader point is simple: it’s worth knowing there are options beyond “move everything to a private bank”.
The risks, and who it’s for
Borrowing against investments introduces risk, so there must be clear boundaries before considering such a move. For example, the loan-to-value (LTV) is typically between 50% and 60%, i.e. up to ÂŁ60,000 of borrowings per ÂŁ100,000 of portfolio value.
Interest costs can change, and if markets fall, the loan-to-value can worsen. In plain English: if the portfolio value drops, a lender may ask for more security or partial repayment. That’s why sensible borrowing levels and a clear repayment route matter.
Using borrowing to “leverage” a portfolio is even more complex. While it can magnify returns, it also magnifies losses, leaving investors potentially exposed. In most cases, the sensible goal is short-term flexibility, with a clear repayment plan.
A note for internationally mobile families
For expats and internationally mobile families, the sequence of decisions often matters more than expected. Some people living overseas still hold UK investments or ISAs and want liquidity without triggering unnecessary tax or losing valuable wrappers. Others may return to the UK within a few years, where timing can affect outcomes, which is why cross-border situations benefit from joined-up planning.
The takeaway
Borrowing against an investment portfolio won’t suit everyone, but it’s a useful tool to understand. Particularly if selling would trigger avoidable tax, dismantle valuable wrappers, or force decisions at the wrong time.
Used deliberately, with appropriate limits and a clear repayment plan, it can provide flexibility without undoing years of careful planning.
Get in touch if you’re considering borrowing against your investments – whether for a property purchase, a business opportunity, or short-term liquidity. We’d be happy to help you think it through.
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