I'd like to take a margin loan in my taxable account at Fidelity to get cash for a down payment of a property for a few months until I get the proceeds from another sale. I've (obviously) never done it before and the interface seems a bit confusing. To do this, I would go through the steps to sell the mutual fund but select Margin for the Trade Type? Then the funds will be distributed in my sweep account and I can transfer them out?
Then to close out the margin position, I would transfer the cash to the account and go through the process to buy the fund again and as long as the amount I bought is greater than the margin balance, it will close it out?
Thanks for any advice
Part one, to take a margin loan, you should not be selling securities. The whole point is to continue to own them and still be able to withdraw cash. I too have fidelity, but i have only used margin to buy additional stocks, not withdraw cash, but having to sell seems fundamentally wrong and fidelity should walk you through it better. If you have already converted the account to margin, then all your positions should have the word (margin) beside them. And all buys and sells in the account will show up as margin, unless prohibited.
Part two, to pay off the loan. Once you take out the loan, the core balance position that shows your cash will turn negative. Every day you are charged interest on this amount (payable monthly I do believe), so simply deposit cash and the position will shrink (turn less negative), and eventually go positive. At which point fidelity will stop changing you interest, and it will behave just like normal. The process is actually really easy. So easy in fact I ended up taking out margin once or twice I didn't intend to. Very small amounts.
If you want to widdle away at the balance, you can turn off dividend reinvesting and that will deposit cash into your account instead of buying shares. Effectively paying the balance down slowly. It's normally around 8% so could be better at these valuations.
