Definitely, with my monthly savings it should be paid back in 2-3 months.
Only one withdrawal per month is free. After that SEPA transfer in EUR is 1 EUR, CHF withdrawal is like 8 CHF I think.
2 Likes
Yes, Iâm aware of that. IB even reminds you before you do the withdrawal. Anyway, my cash normally only goes in the other direction 
1 Like
Beyond the 1 free withdrawal per month, its 11 CHF for any additional transfer.
Where can I find this information? Which report shows the accrued interest?
I think it is called âactivityâ report. You open âmonth to dateâ or âyear to dateâ and there is a section called âinterest acrualâ in it. It is only calculated up to the day before
Strange, I tried that but donât see any mention of accrued interest at all. Itâs not a big deal, but would have been nice to see it.
I am reading the article in Mustachian post on IB margin loan: How to open a margin account on IBKR (Interactive Brokers)
- You have CHF 300â000 invested in the stock market at IBKR
- Since they have âthe controlâ on these assets, they allow you to borrow 50% of this amount, i.e. CHF 150â000 (this limit is called âReg T marginâ)
- So letâs say you borrow CHF 150â000 by transferring it from your Interactive account to your bank account
- Three months later, a huge stock market crash occurs, and your CHF 300â000 invested in the stock market is worth only CHF 200â000. Then, IBKR will sell CHF 50â000 of your shares automatically so that your remaining loan will follow the âRegulation Tâ (i.e. your assets of CHF 200â000 only allow you to have a loan of CHF 100â000 maximum)
I think the maths is incorrect. Hereâs why:
- If IBKR only force sells CHF50,000, your portfolio becomes CHF 150,000 but your loan is still CHF100,000.
- So the Reg T ratio, is still greater than 50%.
So, IBKR should force sell CHF100,000. So your portfolio becomes CHF100,000 and your loan becomes CHF 50,000. This makes the Reg T ratio 50%.
I am still trying to get my head around it. Please correct me if my logic is not right. Thank you so much!
I think itâs wrong, the Reg T margin only applies at the time of purchase.
What you want to check is the maintenance margin, which can be lower than 50%, depending on the securities.
1 Like
No, this is correct. RegT or portfolio margin is also checked overnight. If you are on portfolio margin, which you should be if you intend to borrow and you have enough assets, the overnight maintenance margin could be 30% or so.
There is another problem with this description: the stocks should be sold the first day (night?) the margin drops below overnight maintenance level.
200k - 150k = 50k net value. 50k net can support 100k stocks and 50k loan. 100k stocks are sold. You are right. Sorry, took some time to activate my slow analytical brain.
3 Likes
How would you declare your taxes, if you end the calendar year with a margin loan of a certain value? And could there be benefits from a tax perspective?
you put the margin loan as debt, and deduct the interest payment you get from your income.
On the other side you obvioulsy put all the shares bought with margin on your wealth, so that âevens outâ of course depending on the market it may not be even.
The only drawback is that you may be considered professional investor because are investing on margin, but if you do not fullfill other criteria (like if you never sell) that shouldnât be a problem.
1 Like
Hi guys, I only just saw this thread for the first time. A lombard loan at IBKR sounds interesting. There are a lot of questions in my head.
- do they give you the loan for anything you want?
- so can you buy real estate in Switzerland?
- is the loan in USD or can it also be in CHF?
- how much % of your portfolio can the loan be? in other words, whatâs the max LTV ratio?
- does the LTV depend on the type of stock you hold?
- can IBKR give you a margin call any time they want? or is there some protection?
- can IBKR hike the rate any time?
- can you then quickly transfer your stocks & loan to another broker?
Iâm asking these questions, because what Iâve been considering is this. If one day I reach an insane value of my stock portfolio, like $5 million, I can completely stop working and retire. But then I would not be able to get a mortgage loan. So if I wanted to buy a house for, say, $2 million, I would need to sell a large chunk of my stock portfolio. What if, instead, I leveraged my portfolio and took a lombard loan, to finance real estate purchase?
Or would any bank give me a mortgage loan secured by both the house itself and my stock portfolio on the top, just to tackle the issue of the 33% affordability requirement?
I took out a small margin loan this summer to buy shares for a cooperative-owned rental apartment.
Once you have a Portfolio Margin account, it really is as simple and quick as withdrawing cash. You just end up with a negative balance in the currency you withdraw.
As of right now I could go and withdraw up to 50% of the current portfolio value in CHF or EUR, so up to 33% LTV for my âall-in VWCEâ portfolio. I only have external accounts set up in CHF and EUR but imagine all that matters/changes depending on the loan currency is the interest rate.
As far as I know, the margin requirement and interest rate can change daily depending on market conditions but I donât have a citeable source ready. Hoping that someone else will pick up those more specific questions for me
2 Likes
You can do whatever you want with the money. Invest it in stocks, or transfer it to your bank account. You donât make a contract for a loan, you just withdraw the money/invest it and your account balance goes negative.
Yes, see above.
You can do it whatever currency you want, itâs just the interest rates that differ.
IBKR provides good documentation on the rates and when you get a margin call.
Yes, normally in line with interest rate hikes in the respective country of the currency.
You canât transfer the loan, itâs not like a loan at a bank, you just have a negative balance and you need to balance it to 0 before you can transfer your securities.
1 Like
OK, so different interest rates for different currencies, but I guess one also has to take exchange rate risk into consideration? If I hold VT in USD, but take a loan in CHF, then not only can I get hit if VT tanks in USD, but also if USD tanks relative to CHF, right?
OK so I guess, more realistically, if you have a lombard loan, which you used to buy a house, and you see your LTV creeping up to dangerous levels, you need to get a job and start paying off that loan? Or if things get serious, get a mortgage loan from the bank and use it to pay off that lombard loan.
Tell me, how big is the risk of there being a flash crash in the stock market, and a whole ETF losing over 20% in a day, and the broker selling your stock at this ridiculously lowered price? This would be a disaster. Are there some rules regarding margin calls? How many days do they HAVE to give you to come up with the money?
Donât get a too high loan, if you borrow 25% of your portfolio, the value has to decline by around 50% before you get a margin call.
I suggest reading the guides from IB and get a bit more familiar with margin trading Margin Requirements | Interactive Brokers LLC
No worries, I am in the phase of loose ideas, Iâm not gonna go and get a maxxed out lombard loan based on this little chat. So please allow me to ask uneducated questions.
Edit: @Burningstone so I had a look at that link. Do I understand correctly that the maximum initial margin is 25%, and then the maximum margin at which you get margin called is 50%? So if your stock is worth $4 million, youâre allowed to take $1 million loan. And then you get a margin call if the stock value goes under $2 million?
If you are dependend from a mortgage, the finance institute will see your debt in your tax statement. You cannot finance debt (mortgage) with debt. They will exclude it when doing the calculations.
This is the normal case. But obviously, if they donât see this or they are not asking questions, then it will probably work.
I donât understand what youâre saying. Iâm talking about using a lombard loan instead of mortgage.