Line of Credit with parents as guarantor, but in my name?

[PinguPingu]

So I've been looking around to at margin loans to take advantage of some dividend momentum strategies currently doing greatly with CFD's in which the only downside is if I was to hold for the dividend I do not receive the franking credits. Thus looking for actual ownership. Only thing is LOC's are much better interest rates and no margin calls!, yet, being in my young 20's don't have the ability to actually draw from a mortgage.

Does anyone know, if parents willing I can get the LOC from their mortgage (95% paid off) but in my name and interest payments oaid by me? (and thus tax deductibility)

 

[burglar]

So I've been looking around to at margin loans to take advantage of some dividend momentum strategies currently doing greatly with CFD's in which the only downside is if I was to hold for the dividend I do not receive the franking credits. Thus looking for actual ownership. Only thing is LOC's are much better interest rates yet, being in my young 20's don't have the ability to actually draw from a mortgage.

Does anyone know, if parents willing I can get the LOC from their mortgage (95% paid off) but in my name and interest payments oaid by me? (and thus tax deductibility)

You only get one mum and one dad.
Don't ruin the relationship!!

 

[pinkboy]

Your parents spend most of their working lives paying off the family mortgage only for you to borrow it off them?Tend to agree with Burgler here. Do you not have income/assets you can possibly lend against? Can you not 'save' like the rest of us do?

At best, if you were to go with this and they agree, cleanest way would be for them to set the LOC up in their name against the house, then (commercially) onlend the funds to you at say 2% above their LOC rate. That way they will have some income offsetting no real security should you have some misfortune.

Harsh, but family and money are a hard mix.


pinkboy

 

[PinguPingu]

You only get one mum and one dad.
Don't ruin the relationship!!

Its a good point, I wouldn't say they are doing poorly financially (at all) but they'd probably be pretty pissed if I somehow buggered it up. Although I would only ask for less than 10% of the equity.

I have some nominal income (honestly no real assets though) I can lend against, its more the peace of mind knowing no marginal calls would happen.

 

[tech/a]

So I've been looking around to at margin loans to take advantage of some dividend momentum strategies currently doing greatly with CFD's in which the only downside is if I was to hold for the dividend I do not receive the franking credits. Thus looking for actual ownership. Only thing is LOC's are much better interest rates yet, being in my young 20's don't have the ability to actually draw from a mortgage.

Does anyone know, if parents willing I can get the LOC from their mortgage (95% paid off) but in my name and interest payments oaid by me? (and thus tax deductibility)

Your kidding.
Really really really bad idea.

So if your parents came to you and said they were cashing up from their mortgage to
Give to a 20 something to trade a dividend momentum strategy----you'd be all for it!

If your parents aren't capable of saying no!!
Make sure you are!

 

[robusta]

Must say I agree, not a good idea. I have a line of credit against my own mortgage but would never consider using it for something as risky as a momentum system using CFD's

Take a little glance at history and you will see we get a 10% + correction in the market on average every year.

This article is six months old and there still hasn't been a correction (unless I missed it)

http://www.ritholtz.com/blog/2013/12/guide-to-stock-market-corrections/

 

[PinguPingu]

Must say I agree, not a good idea. I have a line of credit against my own mortgage but would never consider using it for something as risky as a momentum system using CFD's

It would be listed securities, just at the momentum I'm using CFDs and not getting the franking credits. The max drawdown for this strategy is around 17-20%, which is hefty, yeah but not near usual buy and hold. I can shop around a bit more, Westpac is doing a decent ASX100 only investment loan ~6.15% (that is my share universe anyway)

 

[skyQuake]

The max drawdown for this strategy is around 17-20%

So if you're leveraged 1:5 it can be a total wipeout?
And if you're leveraged 1:20...

Have you backtested the strategy over say the past 5 years(post GFC)? 10 years (includes GFC)?
Just some food for thought