Prepaying the interest on a margin loan?

[Realist]

The tax brackets and rates change in 1 months time.

Would it be wise to get a large margin loan, and prepay the interest now while I am paying a higher tax rate?

Anyone ever done this?

 

[tech/a]

If you have excess cash could be a way of deferring tax.
Ive traded Margin for years and never pre pay.

Interest rates have never bothered me for any of my investments.
Mind you in "86" 18% cost me buckets on commercial property.

You take the good with the bad.

 

[123enen]

I have been pre paying for a few years. The logic is there for a tax benefit and also for a fixed interest rate which helps if interest rates rise next year.

Be careful how much you pre pay.
If you choose not to utilise the full margin loan amount throughout the next year, perhaps because you wish to get out of the market for a while, you will not be utilising the interest you have pre paid. Thee is no refund if you do not use it.

 

[RodC]

I never bother prepaying, I prefer the flexibilty of either paying as I go (using dividends) or capitalising the interest.

Rod.

 

[Sean K]

I can't be sure how much I'll have drawn down over the year so I just pay as I go. I try to have it neutrally geared with some good dividend payers that will grow a bit, and hope the growth stocks go well for the capital gain, which is then money for jam.

 

[Knobby22]

If you have unusual capital gains that have brought you into the top tax bracket then it is worth it.

Otherwise it is better not to do it and keep your loan flexibility and your options open.