What is the Most Efficient Method of Borrowing? - Page 3
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Thread: What is the Most Efficient Method of Borrowing?

  1. #21
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    This may be slightly off topic, but only slightly.

    I am always and consistently in red in my margin account. The amount of margin is such that even if my account goes to almost half (as it happened in 2008, RY went down to $28, etc.) I would not get a margin call. I buy mostly dividend paying stocks so the loan is being paid back automatically. I regularly shuffle my living expenses money back and forth to my margin account. When the amount borrowed goes below certain threshold I buy more stock on margin. The margin interest can be written off, so in effect I pay only half. But when I have a larger expense, say renovations or a new car, I borrow from my margin account at half the rate. At over k$100 the margin interest rate at TD Waterhouse is 3%, so one would effectively pay 1.5%. No other fees, complete flexibility.

    I am doing it for over 20 years. I do not see anybody suggesting such a strategy. I wonder if I am missing a serious danger here, apart from investing in the stock market I would anyway?


  2. #22
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    I do exactly the same thing Parkuser, in my IB account. Permanently in the red, but my dividends and covered call premiums more than cover the margin interest. Significantly more.

    I've never had a margin call problem.

  3. #23
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    @Parkuser,

    That is a REALLY good point. All I need to do is borrow on margin at 2.5% in the Questrade account and withdraw the money. Just need to figure out the system. Say, my margin account is at $600K and is invested in bland index ETFs - presumably circa $100K borrowing would be pretty safe?

    And no need to mess with the HELOC. What the heck was I thinking???

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  5. #24
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    Strike that ^. It's Prime plus 2.5% at Questrade. That's too high.

  6. #25
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    If I understand BofM table correctly, k$100 margin debit rate with k$500plus account is 2.85% (U$ 4.5%). I wonder, why Questrade is much different from TD or BofM?

    Added: People talk about the margin account like this was a very dangerous thing. It is if used for gambling. But if you have a diversified k$600 paying 3% dividend and you borrow k$100 at 3% then your margin interest is k$3 but your dividends are k$18, so both your margin interest and the loan are being paid without any need for a new money. The margin call risk is really small.
    Last edited by Parkuser; 2017-05-06 at 11:55 PM.

  7. #26
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    Quote Originally Posted by mordko View Post
    ^ presumably its old (?)
    i switched from traditionnal mortrage to heloc in february.

    worth mentionning that i have multiple accounts at td and always negotiate them to the penny.
    My portfolio: VCN, VUN, VIU, VEE, HBB, ZRE

  8. #27
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    @Larry - Interesting.

    Let's see if I can get anywhere with HSBC and if their "Premier" status is worth anything. Also might be worth touching base with Questrade; I have >>$1M with them between different accounts.

  9. #28
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    Quote Originally Posted by frase View Post
    You may first wish to think if you want a floating rate or a fixed rate due to interest rate risk. Floating rate is normally cheaper but if rates go up your costs go up. For fixed rate your term and rate are fixed. I'm not here to discuss which way rates will go but I am at the age when I recall the prime rate peaking at 22.75%. How would you like to pay that on $150,000. Of course this seems unlikely but an increase in rates could always occur.
    If we went from 2% to 22% prime in a short time frame, the economy would collapse anyway (real estate market would be a smoking ruin).

  10. #29
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    Quote Originally Posted by mordko View Post
    Wow. Thanks GL - interesting little article in the Globe.

    All I want is a HELOC but they did insist on me meeting their "financial advisor" for 1.5h to get "an independent view of my financial affairs". Told them wasn't interested but the agent insisted. I think she is travelling from Windsor (!), so that will be a nice 8-hour return trip for her.
    Don't let them anywhere near your assets.

  11. #30
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    Quote Originally Posted by mordko View Post
    @Parkuser,

    That is a REALLY good point. All I need to do is borrow on margin at 2.5% in the Questrade account and withdraw the money. Just need to figure out the system. Say, my margin account is at $600K and is invested in bland index ETFs - presumably circa $100K borrowing would be pretty safe?

    And no need to mess with the HELOC. What the heck was I thinking???
    Nothing beats interactive brokers margin rates. Starts at 2% for the first $140k then declines to 1% for amounts over $1.4mm.
    https://www.interactivebrokers.com/e...st&p=schedule2


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