Margin Loan Reduction

20Hurtz · 4 March 2011

Hi,

I have been trading/investing for around 3 years through comsec. I'm looking at winding down for personal reasons.

My main concern at the moment is reducing my margin loan. This is my hypothetical position.

Total Loan Balance.................$64,921.54
Unsettled Transactions.............$5,013.40
Loan Liability.........................$69,934.94
Credit Limit..........................$150,000.00

Equity Value.........................$169,882.72
Managed Funds Value..............$36,879.30
Total Portfolio Market Value.....$206,762.02
Total Portfolio Lending Value....$140,462.74

Current LVR............35.77 %
Base LVR................71.85 %
Margin Call LVR........76.85 %
Cash Available..$70,527.80

I am having a bit of trouble understanding/seeing how all this ties in. To start off I would just like some help in calculating how much I should reduce my margin loan by to end up with a LVR of 60%?

This reduction won't be done by me putting money in from another account, I will be asking the bank to reduce my margin loan.

Any help appreciated

suhm · 4 March 2011

If your LVR is 35.77% you would have to borrow more money to reach a LVR of 60% not reduce your margin loan. Or maybe I have misunderstood your question.

Tysonboss1 · 4 March 2011

20Hurtz said:
Hi,

I have been trading/investing for around 3 years through comsec. I'm looking at winding down for personal reasons.

My main concern at the moment is reducing my margin loan. This is my hypothetical position.

Total Loan Balance.................$64,921.54
Unsettled Transactions.............$5,013.40
Loan Liability.........................$69,934.94
Credit Limit..........................$150,000.00

Equity Value.........................$169,882.72
Managed Funds Value..............$36,879.30
Total Portfolio Market Value.....$206,762.02
Total Portfolio Lending Value....$140,462.74

Current LVR............35.77 %
Base LVR................71.85 %
Margin Call LVR........76.85 %
Cash Available..$70,527.80

I am having a bit of trouble understanding/seeing how all this ties in. To start off I would just like some help in calculating how much I should reduce my margin loan by to end up with a LVR of 60%?

This reduction won't be done by me putting money in from another account, I will be asking the bank to reduce my margin loan.

Any help appreciated

As stated already from what you have told us your margin loan is already well below 60% LVR.

Logique · 4 March 2011

20Hurtz, it works as below:
___________________________________________
Total Portfolio Lending Value....$140,462.74
minus:
Loan Liability.........................$69,934.94
equals:
Cash Available.......................$70,527.80
___________________________________________
Loan Liability.........................$69,934.94
divided by:
Total Portfolio Market Value.....$206,762.02
equals:
Current LVR%...........................35.77 %
__________________________________________

So if you're winding down, and wanting to reduce your loan, i.e. reduce your LVR% below 35.77%, to reduce your Loan Liability you can either:
- transfer some cash money into the account
or:
- sell some stocks to pay down the loan

Logique · 4 March 2011

I might add that the arithmetic in the hypothetical numbers is off. I make the LVR% = 33.8% on the numbers supplied.

Sugar Dunkaton · 19 April 2011

As pointed out before - your current LVR is significantly lower than 60%, if you want your LVR to be 60% you will either need to draw down on the equity in your portfolio (Loan Value increases portfolio value stays the same) or transfer security out of your loan (portfolio value reduces, loan value stays the same) - otherwise you can sell shares (reducing the value of your loan) and just withdraw the proceeds out (maintain the same loan balance). Simple.

Margin Loan Reduction

20Hurtz

suhm

Tysonboss1

Logique

Investor

Logique

Investor

Sugar Dunkaton

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