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Financing a Vacation Home

The Opportunity to Realize a Lifelong Dream

Nancy*, an RBC Wealth Management client in her mid-forties, wanted to take advantage of the drop in real estate prices to purchase a beautiful vacation property in Cape Cod.

Hampered by the credit crisis

At the time, the economic environment and credit crisis made mortgages very difficult to obtain. The fact that Nancy depended on her investment portfolio for income made qualifying even harder. Nancy felt the only way she could purchase the property she had dreamed of owning was to liquidate a portion of her portfolio. Yet because the financial markets were down, selling securities at the current value would have meant taking a loss that would dramatically reduce her future income potential.

Thinking outside of the box to gain access to cash

Nancy’s financial advisor met with a team of specialists to discuss Nancy’s situation and goals and explore cash management strategies. The team recommended Nancy use an RBC Premier Line of Credit, secured by the assets in her investment accounts. The line enabled Nancy to gain access to cash for her immediate need to purchase the home, while allowing the assets in her account to continue to work toward her long-term financial security.

This innovative solution is based on the London Inter-Bank Exchange Rate (LIBOR) — the interest rate that the world's largest international banks charge each other for loans. Historically, the LIBOR rate has been about 2% lower than the prime rate, the interest rate that U.S. banks charge to their most creditworthy customers. So in addition to providing cash for the real estate investment, this solution also offered Nancy potential savings compared to what she might pay on a traditional bank mortgage.

Able to purchase a dream vacation home

Nancy was able to purchase her dream vacation home by consolidating her assets with RBC Wealth Management. The consolidation helped her maximize the amount she was able to borrow through the RBC Premier Line of Credit to purchase the property.

* Though the name is fictional to maintain client privacy, this is a truthful depiction of a real client story. 

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