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Any point taking out margin loan if I have enough cash to buy outright?

Discussion in 'Investing Strategies' started by K_veg, 18th Feb, 2011.

  1. K_veg

    K_veg Active Member

    Joined:
    24th Jan, 2011
    Posts:
    32
    Location:
    Milan, MI
    Hi all. I've learned so much from this forum.... it's brilliant!

    So this is my situation. I've recently sold my PPOR, and have $480k sitting in a savings account earning about 6%. I'm holding off buying another place for a few months as I'll be moving interstate.

    I want to start investing in managed funds. Is there any advantage in taking out a margin loan when I've got $480k cash in the bank? I was thinking that this way the interest on the loan would be deductible and I wouldn't have to touch too much of the deposit for my future home.

    If I took out a margin loan, is it possible to have an offset account so that I don't pay interest now, but can still deduct the interest in the future when I redraw the money?

    Thanks in advance!

    Karen
     
  2. builder2818

    builder2818 Well-Known Member

    Joined:
    31st Dec, 2008
    Posts:
    89
    Location:
    Sydney
    You can't invest in managed funds with a margin loan and you only have two options when it comes to interest:
    1. fix the interest rate and pay for the whole years interest up front

    2. leave it variable and the interest charges come out of your account at the end of each month.

    Regardless of which way the shares go, you are going to pay interest no matter what if you take out a margin loan.
     
  3. Johny_come_lately

    Johny_come_lately Well-Known Member

    Joined:
    1st Jul, 2009
    Posts:
    703
    Location:
    SE Queensland
    Why can't you invest in managed funds, with a margin loan?






    Johny.
     
  4. builder2818

    builder2818 Well-Known Member

    Joined:
    31st Dec, 2008
    Posts:
    89
    Location:
    Sydney
    Sorry you're right, you can use a margin loan to buy units in a managed fund.