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Drawdown facility on Margin Loan

Discussion in 'Managed Funds & Index Funds' started by tony, 4th Dec, 2007.

  1. tony

    tony Well-Known Member

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    20th Jul, 2007
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    Location:
    sydney
    Hi

    Do the margin loan providers allow a drawdown facility whereby interest is only paid on the amount drawn down.

    I'm thinking of topping up my margin loan but I would only drawdown if the market suddenly pulled back.

    Many thanks

    Tony
     
  2. Simon Hampel

    Simon Hampel Co-founder Staff Member

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    Unlike LOCs and other property based loans, margin loans are not usually fixed in the amount you can borrow ... it varies on a daily basis based on the margin value of the assets held in the margin facility.

    You generally only pay interest on what you have borrowed (assuming you have borrowed more than their minimum - usually around $20K) ... and you can usually borrow/draw down more (up to your pre-determined limit) at any time.

    The trick to remember is that if the market pulls back, your margin value drops, and hence the amount you can draw down decreases. Unless you are running very conservative LVRs, you may find yourself a bit limited if you try to use your margin facility to buy into a falling market (depends on the nature of your portfolio and how far it drops during the pullback though).
     
  3. bundy1964

    bundy1964 Well-Known Member

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    Even better than a limit is "You will get scared of how much you have borrowed before we get scared of how much we have lent you." I think for me that point is around 5 million not counting property :D
     
  4. Bantam Roosta

    Bantam Roosta Well-Known Member

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    Canberra, ACT
    As far as CommSec is concerned, who I am with, you only pay for the actual amount you have drawn down. I have a 'limit' of 100k, but I've only currently drawn down about 45k, so I only pay interest on the 45k, but I have the ability to borrow up to 100k, assuming LVR requirements are met.

    If I want to increase my limit, it is also a very easy process, as CommSec don't really care what your limit is (from what I can gather), because you can't borrow the full amount unless your LVR is suitable anyway.

    BR
     
  5. AsxBroker

    AsxBroker Well-Known Member

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    Hi Bantam,

    I've been told that the SGB doesn't have a drawdown limit, just don't buy a yacht or something with the money (though you can, just figure it out with your accountant ;) ).

    Cheers,

    Dan

    PS This is general information, before making an investment decision speak to your FPA registered Financial Planner.
     
  6. bundy1964

    bundy1964 Well-Known Member

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    Adelaide, SA
    That and capitalised interest with a 10% buffer is :D
     
  7. coopranos

    coopranos Well-Known Member

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    11th Oct, 2006
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    Perth
    Similar with Suncorp Margin Lending - there is no income check or anything, you can keep borrowing as long as your LVR isnt hit.