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Margin Loans Fixing Margin loan rate

Discussion in 'Finance & Banking' started by crc_error, 7th Nov, 2007.

  1. crc_error

    crc_error The Rule of 72

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    Has anyone fixed their margin loan interest rate?

    I'm with commsec, and if I fix for a term, you need to pay in advance annually, which is ALLOT of money to pay at once!

    Looks like their 3 month fixed rate might be the way to go as its 0.3% cheaper than the variable rate!

    I would like to have a 5 year fixed rate for a portion of my portfolio, but paying in advance is stupid..
     
  2. Simon Hampel

    Simon Hampel Co-founder Staff Member

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    You only need to pay annually in advance, and the idea is that you do this just before the end of the financial year, thus bringing the deductions into the current year and maximising your tax return.

    Of course, this only works once, and you have to continue to pre-pay the interest to maintain the benefit ... unless your income drops and you no longer need the deduction.
     
  3. crc_error

    crc_error The Rule of 72

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    yes, but can you do it like a home loan, where the payments remain say monthly and are fixed for period x?
     
  4. Simon Hampel

    Simon Hampel Co-founder Staff Member

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    Yes, most lenders offer a fixed rate paid monthly in arrears option.
     
  5. crc_error

    crc_error The Rule of 72

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  6. Simon Hampel

    Simon Hampel Co-founder Staff Member

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    I fixed in June this year for 12 months and paid in advance (capitalised the interest) - but I normally don't fix.

    I only did it due to my circumstances at the time, and the fact that I'll be able to revert back to paying monthly in arrears at the end of this financial year without much of a tax hit.
     
  7. Glebe

    Glebe Well-Known Member

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    I pre-pay annually each June. Seems to work pretty well for me. The lenders get pretty agressive around that time of year so it's possible to get some good deals.

    I'm on 7.65% this financial year with Suncorp.

    If you think it will adversely affect your cashflow you can always capitalise it so long as your LVR can withstand it.

    Previously I've been able to pay for the interest without capitalising it, but as the portfolio and loan grows that's a losing battle.. (I reinvest dividends/distributions)
     
  8. crc_error

    crc_error The Rule of 72

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  9. Glebe

    Glebe Well-Known Member

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  10. crc_error

    crc_error The Rule of 72

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  11. crc_error

    crc_error The Rule of 72

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    Just spoke to commsec.. and you can fix your rate up to 5 years with interest in arrears monthly..

    apparently to fix for 5 years is the same rate as the standard variable rate..

    the only penalty to break it is $300..

    Do you think its worth fixing since rates are going up?
     
  12. DaveA

    DaveA Well-Known Member

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    thats a fairly low break fee, i expected something a bit higher....