I don't know that I've seen a lot of details, but I didn't realize the rates were supposed to be less than benchmark rates. Either way, the expectation is that the appreciation of the capital exceeds the interest. (Not that anyone should rely on that expectation, but clearly, people do)
And that the lender is offering the loan to capture an ultra high net worth investor; so even if you lose money on the interest, you gain on advisory services and fees; plus first bite at holding the accounts of the heirs. Requiring good collateral and high account minimums make the risk for the lender low --- if broad market value drops significantly, the account should still have more collateral to pledge to get back to 1:1. Also, if market value drops significantly, selling shares becomes easier for the investor, as there may be some shares with capital losses, and paying down the loan becomes more attractive.
> I don't know that I've seen a lot of details, but I didn't realize the rates were supposed to be less than benchmark rates.
I know someone who got a mortgage rate way, WAY below prevailing rates (like around 1%, gotten back when normies like us got rates around ~3%), because 1. he is a very high net worth individual and 2. he owns a business that does a lot of business with the bank. So, he gets extra special treatment because he's rich and the bank appreciates his business and expects the relationship to lead to even more business.
It's not a huge stretch to imagine that Jeff Bezos's bank would happily loan him money at some token 0.01% interest rate or some similar sweet deal.
And that the lender is offering the loan to capture an ultra high net worth investor; so even if you lose money on the interest, you gain on advisory services and fees; plus first bite at holding the accounts of the heirs. Requiring good collateral and high account minimums make the risk for the lender low --- if broad market value drops significantly, the account should still have more collateral to pledge to get back to 1:1. Also, if market value drops significantly, selling shares becomes easier for the investor, as there may be some shares with capital losses, and paying down the loan becomes more attractive.