Servicabilty

[clowboy]

How is servicabilty calculated for margin loans?

I have only looked at the BT website and it states that no credit check is done.

LVR's are also explained but from what I can gather there is no limit to what they will lend provided you come up with the equity for the portfolio.

Is it that simple or do you need to qualify for servicability?

Thanx in advance.

 

[still_in_school]

Hi Clowboy,

im not quite sure either, but as my understanding is....

eg... when im very bullish on a particular stock, or my broker is bullish, simply we just purchase the stock on maximum LVR. and what ever the deposit needed to recieve the loan, simply the cash is put up.

afterwards when we sell the stock:

profit - we just take our capital back, and the margin loan ceases, till a new trade that is taken out with margin, and max out again on the LVR... in the mean time during the loan period, the interest owing is fixed up and payed owing.

loss - same as profit, though if a loss is made, we settle the interest owed, plus pay the outstanding capital owed (margin)

but as for taking out margin loans, ive honestly taken out many of times, but with my broker its usually coming up with the cash or stock as security to take the loan out against, but have never had to provide financial details, i do believe this is the same with most brokers, that no financials are needed, just security of stock or cash to be able to access the margin....

Cheers,
sis

 

[GreatPig]

Clowboy,

I don't know, but I'd guess they probably don't care about serviceability too much. Stocks that you can margin lend against would be pretty liquid and I'd imagine your LVR wouldn't be too high, so if you stopped paying, the lender should just be able to sell your shares and recover any outstanding money (same as when you can't meet margin calls).

Not so easy with property as selling could take some time and effort.

But I'm just guessing here.

GP

 

[tech/a]

Hmm some explaination needed here.

You shouldnt be trading other peoples money unless you know this!!

This is BT's (Bankers Trust) requirements others maybe slightly different.

You are allowed 10% fall in your porfolio PLUS available funds.

So lets say you have a portfolio of a value of $100K and available funds (surplus to that being traded gained from some profit for instance) of $5000 then your holdings could drop $15000 before being called.

The lender is a SECURED creditor secured by cash or stock equity.
As such they dont need sevicability determined.

While Im at it Ill answer another FAQ.
How do I know how much of a stock I can buy from the % the lender allows for a stock.

Lets say you have available funds of $10000 and you want to know howmuch you can buy on margin at an allowable 70%
This is calulated by dividing $10000 by 30% = $33,000 so you could buy on Margin $33k of that stock.
40% allowable would be
$10K/.6 = $16,660 worth

tech