Some Questions on Using a CommSec Margin Loan

[bellenuit]

I am considering establishing a margin loan with Commsec and have a couple of questions that hopefully somebody experienced with margin loans may be able to answer. I have emailed CommSec but they won't reply by email and their helpline has been extremely busy of late.

1. I currently pay for my share purchases from my CommSec Cash Account (CCA). If I have a margin loan facility established, but also have money in my CCA, and I purchase some marginable securities, do I get to nominate at each purchase where the funds are to be sourced - CCA, margin loan or combination thereof?

2. I know some securities do not count when calculating my margin limit. However, if I am well under my margin limit, am I allowed purchase non-marginable securities with my margin loan, if the result of the purchase still keeps me under my margin limit? It would seem to me that this should be possible as I could achieve the same end result by selling some securities that are marginable, buy the non-marginable securities with the cash proceeds thereof and then buy back the previously sold marginable securities using the margin account. However, the latter would entail additional transaction costs and would also have tax implications that I might want to avoid.

 

[Logique]

G'day Belle,
my understanding of it is:

'..do I get to nominate at each purchase where the funds are to be sourced - CCA, margin loan or combination thereof?'
- No. Your buys are made directly from the margin loan account, which has a balance = cash + lending value from the marginable stocks. If you can't afford a buy, or if your margin (LVR) gets too high in a falling market, you would then need to transfer in some cash. Or alternatively sell off some stock to reduce the loan balance.

'.. if I am well under my margin limit, am I allowed purchase non-marginable securities with my margin loan, if the result of the purchase still keeps me under my margin limit?'
- Yes you are.

'..selling some securities that are marginable, buy the non-marginable securities with the cash proceeds thereof and then buy back the previously sold marginable securities using the margin account'.
- Remember that marginable securities increase your available funds by attracting lending value, that's the whole point of margin loans. Changing the mix to more non-marginables reduces your capacity to make more buys without importing more funds from the cash account. Given two equal stocks, I would always sell the non marginable one first.

 

[bellenuit]

Thanks Logique. Just what I needed to know.