Author Topic: Interactive Brokers margin loan question  (Read 602 times)

marcus_aurelius

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Interactive Brokers margin loan question
« on: August 08, 2021, 11:42:20 AM »
I have $60K cash and $500K securities in my Interactive Brokers account. I want to borrow $100K on margin for a property deal (I will not borrow more than 20% of my account to avoid a margin call). My question is, will IB subtract my cash balance in deciding my margin loan, i.e. is my margin loan $40K ($100K borrowed minus my $60K cash balance) or the full $100K?

I won't be touching that $60K cash since it's part of my 12-month cushion.

Treading carefully since I am new to margin investing. Thanks for your advice.
« Last Edit: August 08, 2021, 11:50:53 AM by marcus_aurelius »

marcus_aurelius

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Re: Interactive Brokers margin loan question
« Reply #1 on: August 08, 2021, 12:42:55 PM »
This is etrade's policy: With a margin account, you can either have a cash balance and no margin balance, or a margin balance and no cash balance. You can't hold cash and borrow on margin. So in my case, I can't park $60K and take a loan of $100K. I will need to take a margin loan of $40K, or move my $60K somewhere else and take the entire loan of $100K.
« Last Edit: August 08, 2021, 12:46:57 PM by marcus_aurelius »

theolympians

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Re: Interactive Brokers margin loan question
« Reply #2 on: August 08, 2021, 12:45:14 PM »
I know nothing about margin loans. I found the Fidelity website that goes into significant detail about them and gives the plethora of risk that scared me away. Caveat emptor.

https://www.fidelity.com/trading/margin-loans/overview

Financial.Velociraptor

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Re: Interactive Brokers margin loan question
« Reply #3 on: August 08, 2021, 01:35:35 PM »
You can borrow 40k at IB and consider the 60k EF as a contingency loan.  You can't have cash and a loan at the same time.

Alternatively, put the 60k in a cash like investment such as 90 day treasuries and then take the 100k loan.

trollwithamustache

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Re: Interactive Brokers margin loan question
« Reply #4 on: August 08, 2021, 04:56:31 PM »
You can borrow 40k at IB and consider the 60k EF as a contingency loan.  You can't have cash and a loan at the same time.

Alternatively, put the 60k in a cash like investment such as 90 day treasuries and then take the 100k loan.

Why do the treasury investment? IB margin rate will be about 1.59 %.  OP is better off withdrawing the 60k as cash and taking a 40k margin loan rather than 100k margin load with 60k making less than that. If OP later needs some of the 60k for expenses as their emergency fund, they can borrow a lot more on margin. at the 1.59ish rate.

Plus, not clear that this applies, but not all securities can be margined at the 50% rate, so without knowing what is in OP's account, its better to be at the lower % use of margin. If OP is asking margin questions, they should probably keep it simple when they dip a toe in for the first time.


Financial.Velociraptor

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Re: Interactive Brokers margin loan question
« Reply #5 on: August 09, 2021, 03:38:21 PM »
OP insists on keeping 60k as EF.  Only way to do that is put the 60k in cash like investment or withdraw 160k and keep $60k in checking/savings, maybe CD.

ChpBstrd

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Re: Interactive Brokers margin loan question
« Reply #6 on: August 10, 2021, 08:28:42 AM »
People would be pissed if their brokerage charged them interest on a loan while simultaneously holding their cash that should have extinguished the loan. IB’s rates are low, but most brokerages are doing 8-9%. Just imagine checking your account once a year and discovering you’ve had $100k in cash earning zero while at the same time paying interest on a $100k loan.

frankglemstone

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Re: Interactive Brokers margin loan question
« Reply #7 on: August 30, 2021, 09:40:48 AM »
Quote
This is etrade's policy: With a margin account, you can either have a cash balance and no margin balance, or a margin balance and no cash balance. You can't hold cash and borrow on margin. So in my case, I can't park $60K and take a loan of $100K. I will need to take a margin loan of $40K, or move my $60K somewhere else and take the entire loan of $100K. And here is also a payday loans near me locator that you can use

Does that mean that he will get 60k on his hands, loan of 100k with interest and 500k on his marging account?
« Last Edit: September 08, 2021, 03:25:41 AM by frankglemstone »

trollwithamustache

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Re: Interactive Brokers margin loan question
« Reply #8 on: August 30, 2021, 05:00:29 PM »
Quote
This is etrade's policy: With a margin account, you can either have a cash balance and no margin balance, or a margin balance and no cash balance. You can't hold cash and borrow on margin. So in my case, I can't park $60K and take a loan of $100K. I will need to take a margin loan of $40K, or move my $60K somewhere else and take the entire loan of $100K.

Does that mean that he will get 60k on his hands, loan of 100k with interest and 500k on his marging account?

he will get 100k cash in hand, with a 60k margin loan at like 2%.