Initiating a Margin Loan while waiting for Mortgage Refi to Finalize

[Mr. Freedom]

I'm in the process of waiting for a mortgage refinance with cash out on my primary residence that I initiated a few weeks ago to be completed which should be another 6 to 8 weeks I'm told. I settled on a lender through the Costco mortgage program and am quite satisfied. I did my research and compared multiple lenders on all the variables and got a 2.625% 30-year with no points and the total closing costs at $825. I've been on the FIRE track for the past few years and have gotten my total net worth to currently about 28 times my annual expenses. Recently I have become more comfortable with the idea of using some leverage for investing.

I already have a specific real estate investment that I intend to use the cash out from the refinance for and there's no time sensitivity with that. I  have another investment opportunity that may come up a little sooner before the refi loan process is finalized that is time sensitive and I was considering using a margin loan from an investment account (rather than selling securities) to accomplish that.

My question is whether adding another (margin) loan in the interim while I'm waiting for this refi loan to be finalized might cause any kind of problem for my eligibility for the mortgage refi loan? Would taking a margin loan be something I would have to notify the lender of or does taking out the margin loan trigger something that the lender would be made aware of anyway? Is it a problem in general to do this while waiting for the mortgage loan process to be completed.

Thank you!

[cool7hand]

I'd be shocked if the disclosures did not uncover the margin loan. Whether it matters depends on the institution's lending algorithm. If the lender is going to find it, why not just ask in advance?

[secondcor521]

Generally when applying for a mortgage refinance you're required to notify the prospective lender of any material change in your financial position.  A margin loan of the size you're implying certainly would impact your debt ratios.  Initiating the margin loan would probably result in the lender canceling the refinance if they find out.  Initiating the margin loan and not notifying the lender almost certainly violates your duties and is probably mortgage fraud.

Were I in your shoes I would choose between the refinance and the margin loan + associated opportunity.  Or I would try to accelerate the former and defer the latter to get the timing to work out.

[MustacheAndaHalf]

I would not experiment with torpedoing a loan application.

The loan application contains your assets and liabilities.  The margin loan wasn't listed, so if it suddenly comes into existence, your application is incorrect.  To say the least, your timing is suspicious.

The section on your "debts" in the loan paperwork should cover the situation you describe.  You could also call the bank and ask what level of margin loan would not hurt your loan application.

[talltexan]

Getting that mortgage in place at that rate should be a top priority goal. You can wait to start investing for the few months you need to get that loan closed a funding.

Your investing goals are about creating a better life ten years from now. Waiting to build those positions for sixty days won't materially affect your timeline, but losing out on that mortgage rate will frustrate you, as ten-year treasury yields have already started going back up.

[Financial.Velociraptor]

I had a Finance prof in grad school who said "Daddy always said" (It should be noted "daddy" was also a Ph.D. professor of finance from west Texas), "Bulls and Bars both make money; but hawgs always get slaughtered."

At 28x spending, you have already won the game.  Don't hose it up by getting greedy.  Agree with above posters you are talking about mortgage fraud.

[Mr. Freedom]

Thank you so much everyone.  Excellent and wise advice that I will abide by.  I appreciate it.