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Margin Loans Margin Loan affect on Servicability/LVR

Discussion in 'Finance & Banking' started by Muz, 30th Oct, 2005.

  1. Muz

    Muz Member

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    15th Aug, 2005
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    Tassie
    Hi Everyone,

    Not sure if this question has been asked before. :D

    Just starting to research shares/margin loans etc and am wondering if I borrow money via a LOC and then margin loan to purchase shares/navrainvest whether this would have any affect on my servicability or lvr to buy more rental properties? :confused:

    Any thoughts?? :)
     
  2. Simon Hampel

    Simon Hampel Co-founder Staff Member

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    9th Jun, 2005
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    Location:
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    Depends on the lender you are asking for more money.

    There are two issues:

    1. if you have a LOC, some lenders will calculate your commitments as if it were fully drawn. May as well fully draw it then and invest in shares/funds/more property :D

    2. if you have a margin loan, some lenders will calculate your commitments fairly harshly. I don't know exactly how they would treat it though.

    So I think the answer is "yes it would have an effect on your servicability", but the extent of which I don't really know. Need one of our resident mortgage brokers to step in here and offer some info.
     
  3. pthm

    pthm Well-Known Member

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    25th Aug, 2005
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    the whichbank said margin loan easier than LoC

    I have come across this question before with the CBA (whichbank). We applied for an increase in our LoC but the lending manager said no because we had reached our serviceability. However, he would give us a margin loan (secured by our share portfolio) as there would be no serviceability requirements for a margin loan. It would be easier to get approval for a margin loan than for an increasea in LoC - even though we know that there is enough security in our house for the increased amount. The serviceabilty was the problem - not enough salary to support the increase payment etc.
     
  4. Muz

    Muz Member

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    Thanks Sim & pthm :D

    Its great to get others perspective.
     
  5. Dave

    Dave Well-Known Member

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    17th Aug, 2005
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    But wouldn't the increase in income generated from the margin loan (via shares/managed fund) more than 'over-compensate'?