Margin loan to meet mortgage relationship discount tier?

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60B4E24B
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Joined: Tue Jul 16, 2019 8:55 pm

Margin loan to meet mortgage relationship discount tier?

Post by 60B4E24B »

How bad of an idea is this? I'm $200k away from meeting the next tier of relationship discount on a mortgage at Wells Fargo. It would lower my rate by 1/8. They only need the money in linked accounts for a few days while they price the loan.

I have $300k in equities at TDA that I could borrow against. I would only need the loan for two weeks max. Looks like it would cost less than $750. Loan amount is $1.7m, so the 1/8 is worth $120 or so a month.

Will the underwriters balk at this? It won't hit my credit, but would I have to explain the cash coming out of nowhere?

(I can't move the account to WellsTrade because I work for a hedge fund and Wells isn't an approved broker for us).
abracadabra11
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Re: Margin loan to meet mortgage relationship discount tier?

Post by abracadabra11 »

Have you figured out how much of a drop needs to occur in your equities holdings at TDA before triggering a margin call? If not, you should start there.
DH0
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Re: Margin loan to meet mortgage relationship discount tier?

Post by DH0 »

I would be careful with this. My experience with a relationship discount last year (BofA not WF) was that they went to great lengths documenting where the assets came from by requiring statement from the external account before and after the transfer. The $200k in margin debt on your TDA account should be a red flag. At minimum I would expect them to view it as a liability i.e. monthly payment and therefore potentially affect your ability to qualify for the mortgage. Why not just transfer the whole TDA account to WF and then transfer it back after you close?
Topic Author
60B4E24B
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Re: Margin loan to meet mortgage relationship discount tier?

Post by 60B4E24B »

DH0 wrote: Fri Aug 14, 2020 10:57 am I would be careful with this. My experience with a relationship discount last year (BofA not WF) was that they went to great lengths documenting where the assets came from by requiring statement from the external account before and after the transfer. The $200k in margin debt on your TDA account should be a red flag. At minimum I would expect them to view it as a liability i.e. monthly payment and therefore potentially affect your ability to qualify for the mortgage. Why not just transfer the whole TDA account to WF and then transfer it back after you close?
Wells isn't an approved broker for us, none of the approved brokers have strong mortgage departments.

Yeah, definitely worried about the underwriter asking where $200k came from.
Topic Author
60B4E24B
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Re: Margin loan to meet mortgage relationship discount tier?

Post by 60B4E24B »

abracadabra11 wrote: Fri Aug 14, 2020 8:13 am Have you figured out how much of a drop needs to occur in your equities holdings at TDA before triggering a margin call? If not, you should start there.
Apparently a lot. Most of my stocks are in the 30% margin category, so they would let borrow 3x my account balance.
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whodidntante
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Re: Margin loan to meet mortgage relationship discount tier?

Post by whodidntante »

60B4E24B wrote: Fri Aug 14, 2020 6:09 pm
abracadabra11 wrote: Fri Aug 14, 2020 8:13 am Have you figured out how much of a drop needs to occur in your equities holdings at TDA before triggering a margin call? If not, you should start there.
Apparently a lot. Most of my stocks are in the 30% margin category, so they would let borrow 3x my account balance.
Might want to check your math there. :twisted:
Frome
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Re: Margin loan to meet mortgage relationship discount tier?

Post by Frome »

We did this for a new mortgage last year. I told the bank exactly where the funds were coming from and they said it was fine. In the end, I don’t think we came out ahead because I refinanced a year after getting the initial loan.
Frome
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Re: Margin loan to meet mortgage relationship discount tier?

Post by Frome »

By the way, you won’t be able to borrow 200k against 300k of equities. At most, you’ll be able to get 150k and that will depend on how risky they assess them to be.
AlohaJoe
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Re: Margin loan to meet mortgage relationship discount tier?

Post by AlohaJoe »

Frome wrote: Sat Aug 15, 2020 7:21 am By the way, you won’t be able to borrow 200k against 300k of equities. At most, you’ll be able to get 150k and that will depend on how risky they assess them to be.
Right this very second Interactive Brokers would allow me to do a wire transfer to my bank of 76% of the value of my securities. Anyone with Portfolio Margin instead of Reg T margin would be in a similar situation.
Frome
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Re: Margin loan to meet mortgage relationship discount tier?

Post by Frome »

AlohaJoe wrote: Sat Aug 15, 2020 7:53 am
Frome wrote: Sat Aug 15, 2020 7:21 am By the way, you won’t be able to borrow 200k against 300k of equities. At most, you’ll be able to get 150k and that will depend on how risky they assess them to be.
Right this very second Interactive Brokers would allow me to do a wire transfer to my bank of 76% of the value of my securities. Anyone with Portfolio Margin instead of Reg T margin would be in a similar situation.
Interesting. I guess the rules are different at different brokers. Fidelity has a max of 50%. I thought that was a regulation, but guess not.
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