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MarginLoan - Can I pay back the money with cash?

Discussion in 'Shares' started by Sk3tChY, 8th Aug, 2007.

  1. Sk3tChY

    Sk3tChY Well-Known Member

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    Ok dudes and dudettes...

    Im going insane trying to figure out what to do, because I'd only want a margin loan between now, and June, because come June I'd like to re-finance, because thats when all the lenders offer super low interest rates.

    So, my question is... Once I no longer want the margin loan from that lender, how can I go about paying back the borrowed money?

    My hope is that I would be able to organize another margin loan from another lender, and basically just pay back the old lender, with the new loaned money, is this possile, or will they make me sell of my securities?

    Example:

    I get a margin loan for $24,500 with commsec between now, and June 2008. I use that loaned money to buy $24,500 worth of shares.

    Come June 2008 and, when I choose to go with another lender can I pay back the margin loan from commsec with cash, or will they make me sell off a proportion of my securities? (This is the first part of my question.)

    Now the second part of my question is... Would I be able to make arrangement from another lender, to give me the money, to pay back commsec, re-financing basically... i.e. 'New Lender' will put $24,500 into my account the day Commsec wants me to pay the loan back.

    Help would be great, thanks. :)
     
  2. Simon Hampel

    Simon Hampel Co-founder Staff Member

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    Refinancing margin loans with another margin lender is pretty easy and usually you don't have to sell your securities (check with your new margin lender first - some do it differently !!!!).

    Just don't leave it until June to organise - it can take a while to be finalised ... especially with managed funds.
     
  3. Sk3tChY

    Sk3tChY Well-Known Member

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    Well that would somewhat defy the whole point of me leaving it till june in the first place...

    You see simmo muh man, basically my plan is that in June, as per usual, the lenders will be offering way lower interest rates, and I hope to capitalize on it.

    e.g Suncorp was offering 7.78% on margin loans that went thru before june 30. BOQ was doing the same, offering 7.79%.

    Basically, i'd be organizing with the new lender in the beginning of June, to pay out commsec, hopefully giving them about 2 weeks notice, would this be cutting it fine you think?

    I'd be timing my commsec margin loan so that my 9 months pre-paid would be up within the last week of june 2008.
     
  4. Simon Hampel

    Simon Hampel Co-founder Staff Member

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    You'd need to check with your new lender to find out how much notice they need. I've had managed fund refinances take 6 - 8 weeks before, but if you only have shares it is generally much quicker (I don't know how long - I've never refinanced a shares-only portfolio).
     
  5. Simon

    Simon Well-Known Member

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    Before you do that refinance you should let the current lender have a crack at meeting the same rate. Even if they come close it is worth it.

    But I do think you are getting caught up over the less important details here. If you save 0.5% (which is a lot) what does it actually work out to be after tax on the relatively small loan that you are looking at having by next June?

    I reckon there are more productive areas to focuss your attention on - like what to buy and ways to turbo charge your investing :D
     
  6. Sk3tChY

    Sk3tChY Well-Known Member

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    This is true to a degree... However one method i've always tried to work on is worrying about these little things, when they mean little, so when the time eventually comes where they mean alot, its just habit to know what to do.

    Like its true now, that it wont make much of a different $ wise, but I want to get in the habit of worryin about these things, because in time, it could end up savings me thousands.

    I'll be figuring out ways to turbocharge my investments, but for now I just want to get all the ground work done, and set myself a nice foundation. :)
     
  7. Sk3tChY

    Sk3tChY Well-Known Member

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    Location:
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    I'll probably ask lenders how much notice they'd need well before it came time to re-finance sim. Like i'd prob start asking lenders in about April-May.

    Does it usually cost anything to re-finance?