Can you use shares as equity for a home loan?

Unfortunately, most lenders will not accept the shares you have invested in as a part of your deposit, irrespective of their worth. This is largely because share prices fluctuate, so their value cannot be estimated with certainty.

The only way you can use something other than cash for a deposit is by using equity held in another property. These methods of paying the deposit are acceptable because they minimise the lender’s exposure to risk.

If you do want to use your shares to help pay your deposit, the most obvious solution involves selling your shares. Once sold, you can then use the sale proceeds to finance the deposit. If the value of your sold shares equals 20 per cent of the property's value, you may be able to avoid the cost of lender’s mortgage insurance (LMI).

 However, share prices are unpredictable. If they happen to be on the lower side when you’re considering selling them, you may not be able to raise the requisite amount. So you may instead want to consider other options like margin loans that allow you to borrow money to expand your investment portfolio. 

The money you borrow can help you diversify your portfolio, especially in an underperforming market, and potentially enjoy more returns on your investment when the market improves. The money you make could then be used towards your home deposit. However, even the most experienced investors cannot accurately predict the direction of the market. The value of your investment could fall at any time, depending on the market forces at work. ​Having a margin loan when the market changes could put you at risk of losing your portfolio entirely, which would hurt your financial position significantly. It’s worth understanding the terms of a margin loan and the risks it involves before you apply for one. Read more about margin loans in our guide.