# Margin loan interest rate



## jet328 (19 April 2010)

When taking out a home loan, you generally pay less than the advertised variable rate ie. maybe 70 basis points on a 500k mortgage. Does the same apply for margin loans?

I know a margin loan is always going to have a higher rate than a home loan, but the average margin loan variable rate is now about 5% above the cash rate


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## Space Invader101 (19 April 2010)

I've never heard of a fixed rate margin loan.  The margin lender decides the loan interest rate.  It's adusted after a RBA's rate decisions.  I never really pay too much attentions to this.

Generally a margin loan is for capital growth.  Buy low, sell high.  I use the dividends to offset the interest on the loan.  

One thing you can do is prepay interest before the end of the finacnial year and claim it off your tax.


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## drsmith (19 April 2010)

Margin lenders offer fixed rates and you can also capitalise the interest.

http://www.bt.com.au/investments/pr...argin-lending-ratios/margin-lending-rates.asp

Lower interest rates may be offered for larger borrowings but in the dark dim distant past (90's) any difference used to be small. There's always negotiation however.

As a general rule it's better to use home equity before a margin loan as interest rates are lower and there are no margin calls in a declining market. Don't do both though, otherwise it may not be possible to weather the storm.


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## Garpal Gumnut (19 April 2010)

I am seriously thinking of taking out a margin loan prior to June 30 to take advantage of the second downleg in the GFC, courtesy of the PIGS and the Chinese. I usually fix a margin loan 12 mo in advance. A double bottom has a certain symmetry about it.

gg


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## drsmith (19 April 2010)

You can fix it for 5 years, capitalise the interest and move to a quiet tropical island.


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## trainspotter (19 April 2010)

Are you suggesting to fix at 6.84% for 12 months or should I let it roll out on the variable? Talking 51% equity commercial loan at a small amount of 385k IO. Your thoughts? Not enough to get me a small island but nevertheless has a factor in the overall scheme of things in TS land.


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## bellenuit (19 April 2010)

Jet. I don't mean to hijack your thread, but I have a question that pertains to the tax treatment of margin loan interest, if anyone can answer it.

If you take out a margin loan to buy shares that never pay a dividend or aren't expected to pay a dividend during the period you intend to hold the shares, is the interest paid claimed under D7 in your tax return "Interest and Dividend Deductions" or does it become part of the cost base for CGT when you eventually sell those shares?


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## jet328 (20 April 2010)

bellenuit said:


> If you take out a margin loan to buy shares that never pay a dividend or aren't expected to pay a dividend during the period you intend to hold the shares




I'm not an accountant, but 99.9% sure you can ONLY claim the interest in your regular yearly tax return if it is to purchase income producing assets


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