Why Selling Investments Isn’t Always the Best Way to Pay Debt
- Mario Zumbo
- 7 days ago
- 1 min read
A client was about to realize over $400k in capital gains just to pay off a loan.
He had a commercial property loan coming due. About a $1M balance. He was frustrated with the lender and ready to be done with it.
His plan was to liquidate part of his investment portfolio and pay it off. No more dealing with the bank. Clean slate.
On paper, it felt like a responsible move.
But it would have created real problems:
• A significant capital gains tax hit
• Reduced liquidity and flexibility going forward
• Selling at a potentially inopportune time
Instead, we structured a pledged line of credit (LOC) against his portfolio.
Interest rate came in roughly 2% lower than his existing loan, saving him more than $20k per year in interest.
He also avoided realizing over $400k in capital gains, kept his portfolio invested, and maintained the flexibility to gradually pay down the LOC from future liquidity events and excess cash flow.
Good wealth management is not just good investment management.
It's about understanding all the tools available and how the different pieces of someone's balance sheet work together.