Margin loan vs. Bridge vs. Heloc

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Humility101
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Joined: Sat Jun 02, 2018 6:39 am

Margin loan vs. Bridge vs. Heloc

Post by Humility101 »

Hello Bogleheads,

My parents (Appx. 1.9m networth, 1m real estate, 800k investments in retirement accts., 100k liquid, no debt) are seeking to buy a condo around 260k and sell one of roughly the same value and want to move on the purchase before the other is sold.

Which option is usually best in terms of fees and total costs out of pocket to cover the purchase until the other condo is sold. Location is the same area for both the property being sold and purchased (Sarasota, FL) and I don’t anticipate them having trouble selling the existing property. I would estimate the loan would be for 3-6months).

Thanks!
ralph124cf
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Re: Margin loan vs. Bridge vs. Heloc

Post by ralph124cf »

In taxable, tax loss harvest any stocks with a loss and offset by selling losses with capital gains stocks. Choose stocks with small percentage gains first.

How much is needed as down payment to get mortgage? Do they need or want to do a completely cash deal?
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cowdogman
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Location: Washington State

Re: Margin loan vs. Bridge vs. Heloc

Post by cowdogman »

Humility101 wrote: Sun Feb 11, 2024 2:33 pm Hello Bogleheads,

My parents (Appx. 1.9m networth, 1m real estate, 800k investments in retirement accts., 100k liquid, no debt) are seeking to buy a condo around 260k and sell one of roughly the same value and want to move on the purchase before the other is sold.

Which option is usually best in terms of fees and total costs out of pocket to cover the purchase until the other condo is sold. Location is the same area for both the property being sold and purchased (Sarasota, FL) and I don’t anticipate them having trouble selling the existing property. I would estimate the loan would be for 3-6months).

Thanks!
Bridges usually have fees and closing costs, rarely the cheapest way to go.

HELOCs are often free to create, tho there is often a termination penalty if terminated within a certain amount of time (which would happen here).

Margin loans are easy to set up (at least at Vanguard and Fidelity). Rates are negotiable.

Don't ignore a standard mortgage--if you can get negative points to pay closing costs and get no prepayment penalty, it can be cheaper. But getting qualified for a mortgage loan is sometimes tricky for the retired.

In the end you need to look at all the options and figure out which is cheapest/simplest. I'm guessing it will either be a HELOC or margin loan.
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cchrissyy
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Re: Margin loan vs. Bridge vs. Heloc

Post by cchrissyy »

margin loan is cheap for the short term and no cost to set up, but, not going to be an option for these people because their net worth is almost entirely in home equity and retirement accounts.
margin is for taxable brokerage not retirement accounts.

i would suggest heloc or standard mortgage

another idea you didn't list would be to withdraw from an IRA but put it back within the 60 day limit. i have no first-hand experience but it's something you can research.
60-20-20 us-intl-bond
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cowdogman
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Re: Margin loan vs. Bridge vs. Heloc

Post by cowdogman »

cchrissyy wrote: Sun Feb 11, 2024 4:11 pm margin loan is cheap for the short term and no cost to set up, but, not going to be an option for these people because their net worth is almost entirely in home equity and retirement accounts.
margin is for taxable brokerage not retirement accounts.
Good point.
hoofaman
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Re: Margin loan vs. Bridge vs. Heloc

Post by hoofaman »

cowdogman wrote: Sun Feb 11, 2024 4:01 pm HELOCs are often free to create, tho there is often a termination penalty if terminated within a certain amount of time (which would happen here).
The type of HELOC I have is a revolving line of credit that's available for 20 years, I could withdraw 280k from it tomorrow to buy the Condo and then repay the draw at anytime, just would be charged interest for the number of days I borrowed the money.
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