Golden Visa Loan vs Self-Funding: A Side-by-Side Comparison

The decision in one paragraph

Self-funding costs you the return on the capital you deploy plus the tax you trigger to free it. Financing costs you interest plus the risk of a margin call. Borrowing wins whenever the expected return on the retained assets, plus the value of deferring the tax charge, exceeds the all-in cost of the loan — and whenever you can survive the drawdown scenario that would otherwise force you to sell at the bottom.

Head-to-head comparison

The ten-year arithmetic on €500,000

Assume a €500,000 investment, a portfolio expected to compound at 6% annually, a 20% capital gains rate on €180,000 of embedded gains, and an all-in loan cost of 4.4%.

Self-funding: you sell €536,000 of assets to net €500,000 after a €36,000 tax charge. Over ten years the return you forgo on that €536,000 at 6% is approximately €424,000.

Financing: you pay roughly €22,000 a year in interest, or €220,000 over ten years, while the €536,000 stays invested and grows to about €960,000. The €36,000 tax charge is deferred, not avoided.

The financed path is ahead by roughly €200,000 before tax on the eventual disposal, on these assumptions. Change the assumptions and the answer changes: at a 3% expected return and a 5.5% loan cost, financing loses money every year it remains outstanding.

When self-funding is clearly right

• The qualifying amount is a small fraction of your liquid wealth — leverage adds risk for a rounding-error benefit
• Your portfolio is concentrated, illiquid or volatile, so the borrowing base is thin and the margin call risk is real
• You hold assets with little embedded gain, so selling triggers no meaningful tax
• You are approaching a life stage where forced liquidity would be disruptive
• The programme restricts encumbered capital, or the paperwork burden outweighs the spread

When financing is clearly right

• Selling would crystallise a large capital gain in a single tax year
• Your portfolio has a long track record of returns comfortably above the loan cost
• Your wealth is productive and illiquid — a business, property portfolio or concessionary-rate asset you do not want to touch
• You need speed: a Lombard drawdown funds in days, an asset sale plus settlement does not
• The funded asset produces income against which interest may be deductible

The hybrid most clients actually choose

In practice the strongest structure is rarely all-or-nothing. Funding roughly two-thirds by loan and one-third in cash captures most of the tax deferral and compounding benefit while keeping utilisation well below the facility limit, satisfying unencumbered-portion rules where they apply, and leaving genuine headroom for a market fall.

It also creates an off-ramp. If rates rise or the spread inverts, you can repay part of the facility from the retained portfolio and reduce the carrying cost without disturbing the qualifying investment.

Questions to answer before deciding

• What is my realistic after-fee expected return on the assets I would otherwise sell?
• What is my all-in loan cost including fees, hedging and cure reserve drag?
• What tax charge would a sale trigger, and could it be spread across tax years instead?
• Could I meet a margin call after a 30% market fall without selling the qualifying asset?
• How long is the capital genuinely committed under current programme rules?
• Would I still be comfortable with this position if rates rose 150 basis points?

Frequently asked questions