but I expect a margin loan must stay in your account at IB [?]
Well, sort of. Say you have $1,000,000 of securities in the account. I think you can write a check for $300,000 to pay a mortgage, and the account will have a $700,000 value, assets of $1,000,000 and a margin loan of $300,000.
That was sort of the idea. The $300,000 used to buy the house will cost you ~1.5% which is $4,500 per year or about $375 per month in margin interest. And you don't need to repay principle (although you need to watch our for a share price decline and margin call). If you have dividend producing stocks in the account, over time their dividends will pay off the margin loan.
A 5% 30 year mortgage for a $300,000 home will have interest cost of $15,000 per year and require principal repayment of $10,000 per year, so $25,000 per year, or $2,083 payment per month.
The difference is really phenomenal.
Of course the big issue is you need to have enough in the brokerage account to take out a margin loan that is both enough to pay for the entire house, and also have enough left over that you aren't worried about getting a margin call due to market gyrations. So you gotta have a lot of money in the account, but if you go have it it makes a lot more financial sense (when rates are 1.5% to use margin to buy a house rather than a normal mortgage).
Just a thought. |
