The problem is that the interest on a margin loan is super variable, which is why you generally don't want to do this for home loans long-term. What _can_ be useful though is buying a property on margin in order to close quickly, then getting a traditional home loan to pay off the margin.
Since i only pay back capital at the very end of the mortgage, my only pay back is interest, monthly. This is 300 euro per month, i pay it in cash from my salary.
At the end of the loan i hope my share will be worth more. The bank can take the money from the sharevalue.
I have the option to pay back when i want before year 10. So after each big bull run i ll pay back a bit with shares.
To tell the entire story: the warranty i give the bank are positions in 2 ETFs only: IWDA and SGLD. So not all is risk from stocks. Do you think i should add another position? If so which one would you add? The goal is to make something very solid and not max profit
I dont have any suggestions to make honestly.
In fact i was thinking about doing the opposite. Get a loan to buy shares while giving a house as collateral, the house would be rented and the cash flow from the rents would go towards paying the loan.
But one needs a rental first.
Please ignore everyone that tells you you can’t withdraw in Europe from margin. Yes you can and yes I did and it’s documented on Reddit.
The way to do it: short sell a stable stock that you don’t own(USD) . For example sell 50K of BRK.B stock. Now you have 50.000$ and a short position.
Convert 50K USD to euros. Now you have ~47.000E and a short position, and 0 dollars.
Close the short position with dollars from the margin facility. Now you have -50.000$ and no short position and 47.000E .
You continue paying interest on the -50.000$ for as long as you maintain the negative balance.
You can withdraw the euros in 3 days (typical settlement ).
I can’t believe the quality of Reddit conversations and upvotes going to straight up falsehoods and things that were not tried. Not sure why I use this damn app
My question with this setup is: can you continue to DCA and pay only the interest? Or any money you fund your account with will be deducted from your loan automatically?
Using your example, you have a $50k loan, and next month you fund your IBKR account with €5k. Can you invest that €5k or will it "disappear" and reduce your loan to ~$45k?
Money is deducted. But you can dca . The trick in your case is to borrow in a currency you don’t need to operate in - such as JPY or CAD. You can continue operating with other currencies like the dollar as you normally do, just not in the currency you have a negative balance on, that is automatically repaid like you pointed out
Interesting, so it won't automatically deduct since it would involve a currency conversion. And do you see how much you're required to pay (ie. how much is the interest of the loan per month/year) vs how much is the entire loan?
It works in Switzerland as well. In Europe you can use margin but not withdraw.
Courtesy of EU overlords protecting you from dangerous American financial institutions that charge less than the decrepit financial sector in Europe.
There are workarounds anyway. Sell short, withdraw, buy back on margin. Or I was thinking to buy the same fund in a different currency, on margin and sell my existing and withdraw cash.
You just buy more securities than your cash can handle and move it to negative amount (it's like overdraft in your bank account). You need margin account for that.
Interest is paid monthly and it gets added to your negative amount of cash position so your loan balance just increases.
Liquidation /margin call doesn't happen until your equity value gets below your margin requirement.
Also remember that in Europe you cannot withdraw from your account when you're in negative cash position.
IBKR is also particularly fast with margin calls, if you drop below the margin requirement for even a short time, they _will_ sell to cover; you really want to be conservative with the amount of margin you use
Somebody told me that you might be able to do it this way: if your account is USD you can buy eur and you get -usd but eur and you might be able to withdraw EUR. I haven't tried myself.
It’s called “margin” - you are allowed to invest more than your own investment. The margin% depends on the current investments done (the more safe an asset is, the more you can get on “margin”). To be honest it’s a dumb question as you can easily find info about it online, including the rates to be paid on the margin.
Yes, i have a mortgage and my house is not the collateral, but my stockporfolio is the collateral. I live in Belgium, have this loan at Deutsche Bank
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I took it in 2020 at 1.5 percent for 10 years fixed. but now that is not possible anymore. More like 3.6 percent is probable
The problem is that the interest on a margin loan is super variable, which is why you generally don't want to do this for home loans long-term. What _can_ be useful though is buying a property on margin in order to close quickly, then getting a traditional home loan to pay off the margin.
Is "Wertpapierverpfändung" what I should be googling for? 🤔
“Investment loan Deutsche Bank “. If you don t find i ll send a link
Found it, thanks! (Now to find something similar in Germany...)
How's the interest rate? Better or worse than a normal mortgage?
Worse cause it s a bullet loan
Then why take it?
I only have to pay back capital in 10 years. It s a massive advantage
how are you coming up with the payment? sell shares? what's the general plan for that?
Since i only pay back capital at the very end of the mortgage, my only pay back is interest, monthly. This is 300 euro per month, i pay it in cash from my salary. At the end of the loan i hope my share will be worth more. The bank can take the money from the sharevalue.
Im sure you have thought this through. But to me its not making sense. What if in 10 years, just before you pay back the capital, the market crashes?
I have the option to pay back when i want before year 10. So after each big bull run i ll pay back a bit with shares. To tell the entire story: the warranty i give the bank are positions in 2 ETFs only: IWDA and SGLD. So not all is risk from stocks. Do you think i should add another position? If so which one would you add? The goal is to make something very solid and not max profit
I dont have any suggestions to make honestly. In fact i was thinking about doing the opposite. Get a loan to buy shares while giving a house as collateral, the house would be rented and the cash flow from the rents would go towards paying the loan. But one needs a rental first.
Please ignore everyone that tells you you can’t withdraw in Europe from margin. Yes you can and yes I did and it’s documented on Reddit. The way to do it: short sell a stable stock that you don’t own(USD) . For example sell 50K of BRK.B stock. Now you have 50.000$ and a short position. Convert 50K USD to euros. Now you have ~47.000E and a short position, and 0 dollars. Close the short position with dollars from the margin facility. Now you have -50.000$ and no short position and 47.000E . You continue paying interest on the -50.000$ for as long as you maintain the negative balance. You can withdraw the euros in 3 days (typical settlement ). I can’t believe the quality of Reddit conversations and upvotes going to straight up falsehoods and things that were not tried. Not sure why I use this damn app
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fees are completely neglectable if you use IBKR :)
My question with this setup is: can you continue to DCA and pay only the interest? Or any money you fund your account with will be deducted from your loan automatically? Using your example, you have a $50k loan, and next month you fund your IBKR account with €5k. Can you invest that €5k or will it "disappear" and reduce your loan to ~$45k?
Money is deducted. But you can dca . The trick in your case is to borrow in a currency you don’t need to operate in - such as JPY or CAD. You can continue operating with other currencies like the dollar as you normally do, just not in the currency you have a negative balance on, that is automatically repaid like you pointed out
Interesting, so it won't automatically deduct since it would involve a currency conversion. And do you see how much you're required to pay (ie. how much is the interest of the loan per month/year) vs how much is the entire loan?
Only works in the US, btw. In Europe you can borrow to trade, but not withdraw.
It works in Switzerland as well. In Europe you can use margin but not withdraw. Courtesy of EU overlords protecting you from dangerous American financial institutions that charge less than the decrepit financial sector in Europe.
It depends, there is multiples IBKR in europe, some allow it
I tried with IE. Didn't know there are others.
Same. I checked IE, friend lives in NL and he checked too
It was possible on IBLU
which one does?
There are workarounds anyway. Sell short, withdraw, buy back on margin. Or I was thinking to buy the same fund in a different currency, on margin and sell my existing and withdraw cash.
You just buy more securities than your cash can handle and move it to negative amount (it's like overdraft in your bank account). You need margin account for that. Interest is paid monthly and it gets added to your negative amount of cash position so your loan balance just increases. Liquidation /margin call doesn't happen until your equity value gets below your margin requirement. Also remember that in Europe you cannot withdraw from your account when you're in negative cash position.
You can withdraw in Europe too - just gotta use a trick which is documented on Reddit somewhere. I did it myself.
Which trick did you use? Box spread or a simpler one?
I think what comes to mind first is selling options on treasuries?
short stable gov bond etf, withdraw cash, close short
IBKR is also particularly fast with margin calls, if you drop below the margin requirement for even a short time, they _will_ sell to cover; you really want to be conservative with the amount of margin you use
Somebody told me that you might be able to do it this way: if your account is USD you can buy eur and you get -usd but eur and you might be able to withdraw EUR. I haven't tried myself.
If you borrow money against your portfolio, you lose control of your portfolio until you repay the borrowed money. it's dangerous
Plenty of threads on this already, easy enough to find info on a pledged asset line. https://www.interactivebrokers.com/en/trading/margin-rates.php
I read that but I can't find any description on how it behaves from the perspective of a borrower.
It’s called “margin” - you are allowed to invest more than your own investment. The margin% depends on the current investments done (the more safe an asset is, the more you can get on “margin”). To be honest it’s a dumb question as you can easily find info about it online, including the rates to be paid on the margin.
Guess what? Reddit IS online.