Hi folks - any recs on which bank to use for a decent line of credit? I have $1M at Wells Fargo but hearing that: - Merrill Lynch would lend around $500k at 1.5% - Raymond James would lend around $300k at 1% Any recommendations? #personalfinance #investments
Trying to best understand this. Are there drawbacks? What if I pledged $1M in investments (retirement + index funds + stocks). Would interactive brokers potentially give me $1M at 1.5% which I could buy a home in cash with?
Potentially but likely not. Your net asset has to be higher vs margin. if there is downturn and falls below margin call, everything sold
Yeah Interactive Brokers doesn't even do margin calls in the sense that they will sell without warnings. So definitely make sure you maintain a healthy margin regardless of the market fluctuations and unexpected flash crashes
Is a line of credit with the others he listed different? Do you have to pledge assets?
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Learn enough about how margin works before jumping into it. Imagine you had a 500k loan against 1m of assets in Feb 2020.
I’m that scenario, if the $1M assets dropped to $700k in assets, what would happen to you? Would the bank demand you rebalance by giving back part of the line of credit?
Different banks have different margin requirements but worst case is that they'd immediately sell off your assets to recoup their money. You would then miss out on all the market gains that followed the momentary drop.
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Wow - thank you!
Isn’t that tiered though? It also sounds like Raymond James’s $300k at 1% beats it? Please correct me if I have a misunderstanding.