I am planning to take a margin loan if needed to fund my down payment or appraisal gap if any. I read about IBKR which has low interest rate. Does IBKR pro account has any hidden charges or monthly fee to maintain the account? Are there any other better options for margin loan? PS: To add some context, I own nearly 500k on msft and planning to not take more than 50k that too only if I am short of 20% down payment and contributing 20% will get me better rate for loan without PMI. Housing budget is 1 mil in Seattle area and planning for 20% down payment with 401k loan and some cash reserves. TC: 300k #personalfinance #investments #housing
Depends what stock you own and planning to margin. If both housing and stock go down in flame you might be on the street.
What if he owns a lot of stock?
If purely msft he can go as high as 50%. Any other tech stock maybe 25% is safe guaranteed no margin call
Super risky. Ibkr won’t tell you they sell your shit if the market turns… it’ll just be gone. If you can’t afford the down payment you can’t afford it. The whole point of it is that it’s the non loan part of your mortgage Ibkr is probably the cheapest but you can also get good rates at wealthfront Robinhood M1. Or if you’re really capable (foolish) do box spreads and get it at risk free borrowing rate from any margin account anywhere
This post rings the bell for housing market top.
it's going crazy in Seattle area...
It is about to top probably. This is a mania. It goes vertical just before the crash.
Make sure you have enough buffer and ideally don’t use meme stocks as collateral as that can end up ugly. Overall not a bad idea and fairly common with private banks and HNW clients. Why tie up 20% in a DP when you can leverage stocks as collateral and use the money to generate returns in the market.
Yes at best planning to loan only 10 to 15% of my portfolio which is in msft.
Nice! If you use IBKR, make sure you’re on the Pro tier. Rates are much better than Lite. Afaik there aren’t any hidden fees and you just pay interest based on the daily outstanding balance.
Stock crash, margin call, and now you’re homeless 🥲
Keep in mind that if Fed increases interest rates, ibkr will also increase their margin rates
Yes worried about that too
If you have a 401k you can take a loan and pay yourself off with interest.
Max 50k and 50% of portfolio. So op will need 100k to borrow max 50k in 401k. Op can also take out ira 10k max per member of household w o penalty. Just add that as income for tax purposes.
You want to exchange a fixed rate (mortgage) with a floating rate (margin loan)? Are you sure that it's a good idea? Are you short in cash? If so, a HELOC is a better option.
Not planning to have margin open for long time as I get more cash in future can close it. However, it's just an option I am exploring for down payment if i am short on funds.
It's not a good idea to use it for down. I wanted to try this path before. I think it brings more limitations. Your DTI will shoot up. That will reduce your max borrow ability.
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Don’t do it. It’s not worth it. Instead try taking Fannie Mae Loan with smaller down %. They have variable APR. unless you have vested stock options coming in less than 6 month to pay by full don’t do it.
Thanks! Updated the post with some context. It's a back up option I am exploring. Btw, I am looking for 1 mil budget and variable loan works for me since anyway I am not planning to stay for more than 10 yrs. How can one get Fannie Mae loan?
Fannie Mae is limited to loan of 750k but allows you to budget only 3.5% down payment. So if you can get a house in less than 800k you are golden. If you are going for jumbo loan then 20% requirement is must. You can also do 10% without PMI if you have a good credit score (dm me for details). Variable APR can overshoot to 20%. This happened in 2019 when there was a spike in repo rates. Smart thing is always to minimize down payment over fixed 30 year.