Margin for home remodeling: is my math correct?

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elexhobby
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Joined: Sun Mar 31, 2019 11:40 pm

Margin for home remodeling: is my math correct?

Post by elexhobby »

I was recently introduced to the concept of margin and have been reading about it on and off for the last 2 months. I want to use the margin funds for my house remodeling, and would appreciate if someone could ascertain my math below.

I own 300K worth of VTI stock. I am planning to borrow 100K on margin and deposit it into my savings account. How much would my VTI investment have to drop before I am hit with a margin call? Lets call this value x.

When my VTI investment hits x, my total fund value is (x+100K). Since the overnight margin is 50%, the margin amount would be (x+100K)/2. I would be hit with a margin call if funds I own equal this margin, or in other words, x = (x+100K)/2. This implies that x=100K.

Since I don't believe VTI will drop to 1/3rd its value in the near future, I feel safe borrowing 100K. Is this calculation correct? Anything else I should be aware of?
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