Transfer my RSU stocks to Interactive Brokers to get a low interest margin loan

Amazon
umez34

Go to company page Amazon

umez34
Nov 15, 2020 54 Comments

Guys,

I want to buy an investment property. To get it I need approx. 60k in downpayment and closing costs. Recently I foubd out that IB margin loans has around 2% interest rate. I started to think to transfer my 150k RSU to IB and get 60k (40%) margin loan instead of selling the stocks.

I understand the risk and that IB csn do a margin call id stocks go down significantly. But I guess 40% is safe. Fidelity offers about 7% interest, so the difference is significant.

Your thoughts? Any experience with IM maegin loans?

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 TOP 54 Comments
  • Amazon
    gujohu

    Go to company page Amazon

    gujohu
    OP 40% margin loan with only AMZN in your account is risky. Please read up IBKR policies. You need 50% overnight maintenance margin for REG-T (regular margin type) so you have a real chance of liquidation if the market crashes and then crashes further after hours.

    IBKR margin rates are cheap because they don't act like traditional brokers. They will not give you a courtesy call to ask you to add funds. They will auto liquidate you and you have no choice in when the liquidation happens.

    Also if you pull out 60k on your 150k worth of stock, your Net Liquidity in your account becomes 90k. That means that a 33% drop in AMZN will mean IBKR will start selling shares! Which is entirely feasible. Amzn does not have to drop to 1200 to get you margin called. Based on your current plan it only needs to drop to ~2000!
    Nov 16, 2020 6
    • Amazon / Manufacturing
      ⚜️.

      Go to company page Amazon Manufacturing

       ⚜️.
      Anyone willing to refer me to IBKR for a margin account if there’s win - win? I’d like to move about 100k+ securities.
      Jan 20, 2021
    • New
      yoDv27

      New

      yoDv27
      Isn't the 50% overnight maintenance margin only for the 1st night you hold? Then it switches to 25%? Otherwise, if this were not true, people would be getting liquidated and called all over the place. Most brokers are happy to extend you the full 50% when you buy long.
      Jul 17, 2021
  • As long as you understand the risk of margin call, it's up to you to decide if it's worth the risk.
    Might consider rebalance to a safer portfolio first.

    Also note that the margin rate might change anytime (Precovid rate was 3%+).
    Nov 15, 2020 11
  • Uber
    uberific

    Go to company page Uber

    uberific
    You'll have to declare it on your mortgage application. Generally you're not supposed to borrow a down payment but you might be able to get around it if you borrow 1-3 months before purchasing.

    It's also just risky. Margin call can happen if stocks drop in value. Interest rate can change quickly.
    Nov 15, 2020 5
  • Dumb question, but these are vested stocks right? RSUs are restricted and usually can't be moved to other brokers
    Nov 16, 2020 3
  • Google
    vandango

    Go to company page Google

    vandango
    LMA . This is common, if you can stomach the risk it’s not bad idea
    Nov 15, 2020 3