Margin finance

[locko24]

I hear that commercial property finance is based on the property, not the individual's financial position. Is this correct? Does that mean the applicant could not have a job when applying for finance, as long as they had the equity/deposit, and the property was considered a 'safe bet'?

Does the same apply for margin loans?

Thanks in advance

 

[Peter_Tersteeg]

Commercial loans are somewhat based on the property, but that would depend on the longer term strategy. In many cases an applicant will need to demonstrate that they can service their own ongoing commitments as well. There's no way to get a single, simple answer without knowing the details of a commercial deal.

Margin loans are generally based on equity. You generally don't have to demonstrate affordability to qualify for a margin loan. If your equity level falls below a certain LVR, your margin loan gets called and you'll need to reduce it (margin call).

 

[locko24]

Thanks Pete.

 

[Aaron_C]

I hear that commercial property finance is based on the property, not the individual's financial position. Is this correct? Does that mean the applicant could not have a job when applying for finance, as long as they had the equity/deposit, and the property was considered a 'safe bet'?

Does the same apply for margin loans?

Thanks in advance

Most people who apply for commercial finance, particularly at the bigger end of town, don't have a 'job'. Many of them are professional investors who solely rely on the property's rental income to meet the repayments. So the banks look at you interest-cover ratio based on this and this dictates how much they lend you. Of course, they look at other things too like your assets/liabilities etc and the security itself.

Margin loans don't need proof of income per se but your income level dictates how much facility they will provide you.

 

[Hoffy]

Margin loans are generally based on equity. You generally don't have to demonstrate affordability to qualify for a margin loan.

In my recent (extensive) experience, this is incorrect. Following legislative changes of last year, most margin lenders are fully assessing servicing. In most cases this servicing also excludes assumed income from investments to be purchased.

 

[locko24]

So in essence, one could build a massive portfolio with no job, and at no cost - assuming one made pefect decisions...

 

[Rolf Latham]

So in essence, one could build a massive portfolio with no job, and at no cost - assuming one made pefect decisions...

there is always a cost............

might not be fiancial, but there is always a cost for a benefit.

Sometimes you just dont pay it now, sometimes later

ta
rolf

 

[Peter_Tersteeg]

The no cost bit is incorrect locko. Margin loans will only allow you to leverage up to a certain percentage, so you've got to put some of your own funds into it.

I've heard that you can leverage up to 80% on some portfolios, but 50% or 60% LVRs appear to be more common.

Hoffy is almost certainly correct if he's stating that income does come into it. I haven't even sniffed in the direction of margin loans since the GFC.

 

[Aaron_C]

The no cost bit is incorrect locko. Margin loans will only allow you to leverage up to a certain percentage, so you've got to put some of your own funds into it.

I've heard that you can leverage up to 80% on some portfolios, but 50% or 60% LVRs appear to be more common.

You can leverage up to 90% with Macquarie Prime - real equities too, not CFDs.

 

[locko24]

there is always a cost............

might not be fiancial, but there is always a cost for a benefit.

Sometimes you just dont pay it now, sometimes later

ta
rolf

Care to elaborate, Rolf?

 

[locko24]

You can leverage up to 90% with Macquarie Prime - real equities too, not CFDs.

You'd want to be pretty sure in your abilities for 90% (or crystal ball reading)

 

[Aaron_C]

You'd want to be pretty sure in your abilities for 90% (or crystal ball reading)

Most of the times it's just luck. Made my first pot of gold with that leverage - it's not for the faint hearted though.

 

[locko24]

Most of the times it's just luck. Made my first pot of gold with that leverage - it's not for the faint hearted though.

So you just flipped a coin on which to invest in?

 

[Peter_Tersteeg]

You can leverage up to 90% with Macquarie Prime - real equities too, not CFDs.

Personally I'd put that in the 'too high risk' category, but that's me, not others. How does Maquarie qualify borrowers for that one?

 

[Aaron_C]

So you just flipped a coin on which to invest in?

Not exactly but you could argue I did. I traded a lot during the GFC so I was shorting/longing banks and resource companies on a daily basis. During that time was good because the swings were 5% everyday. Not anymore though.

 

[locko24]

Not exactly but you could argue I did. I traded a lot during the GFC so I was shorting/longing banks and resource companies on a daily basis. During that time was good because the swings were 5% everyday. Not anymore though.

Cheers. Something to think about