FAQs

FAQs about the Macquarie Margin Loan

Who can open a Macquarie Margin Loan?

Individuals, partnerships, companies and trusts can open a Macquarie Margin Loan.

Can I transfer my existing margin loan to Macquarie?

Yes. To transfer your existing margin loan to Macquarie, simply complete Section 10 'Refinance Authorisation' in the Macquarie Margin Loan Application for Finance.

How much can I borrow?

Macquarie will lend you between 30% and 80% of the market value of over 2,700 shares and managed funds. The exact amount of finance available to you is generally based on the security you provide (i.e. existing shares, managed funds, cash and home equity), and the securities you wish to purchase.

How much security do I have to provide?

The amount of security you need to contribute depends on the Loan to Value Ratio (LVR) of the underlying security you wish to purchase and the amount you wish to borrow.

Can I use a third party's portfolio as security for my margin loan?

Yes. To use a third party as security for your margin loan, the third party must agree to the Loan and Security Agreement by signing a mortgage and guarantee in the Application for Finance. A small fee applies to set this up.

What is the Loan to Value Ratio (LVR)?

The LVR is the percentage of a security's market value (as determined by Macquarie) that Macquarie will lend you. For example, if BHP shares have a 75% LVR, Macquarie will lend you $7.50 out of every $10.00 you want to invest in BHP shares. To view the list of current LVRs for the Macquarie Margin Loan, download the Macquarie Margin Loan Approved Shares List (pdf 46Kb).

What is the market-based limit?

The market-based limit for your portfolio equals each security's market value multiplied by the applicable LVR. As the value of your portfolio changes, the market-based limit changes accordingly. If your loan balance is below your market-based limit (and the credit limit you have agreed with Macquarie), funds are available to buy more investments. As your portfolio increases in value, or if you buy more investments, the market-based limit will increase (a multiplier effect).

My margin loan is approved. What happens now?

Once your margin loan is approved, you need to pledge existing shares and managed funds or deposit cash as the initial security for your loan (unless you have elected to use Third Party Security in Section 13 of the Application for Finance). Find out more about how to pledge security to your Macquarie Margin Loan.

How many shares and managed funds can I purchase with my margin loan?

There is no minimum or maximum number of securities you can purchase.

How do I buy and sell shares?

The process of buying and selling shares is simple as you can trade shares with the broker of your choice. All trades will be settled via the Delivery Versus Payment (DVP) system on CHESS. Trades may not be settled if they cause a margin call or breach the credit limit on the facility. Find out more about managing your investment.

How are dividends and income distributions received?

As your investments are held directly in your name, you receive all potential dividends, franking credits and managed fund distributions. You can elect to credit any dividends and distributions directly to your margin loan.

How is interest charged on a margin loan?

Interest is calculated on the greater of the daily loan balance or $20,000 (even if the actual loan balance is less than $20,000) on a variable interest rate. The minimum interest charge does not apply if your loan balance is zero or in credit.

You can also fix the interest rate on some or all of your Macquarie Margin Loan for a 12 month period by completing a Fixed Interest Prepayment Form.

View the current interest rates for the Macquarie Margin Loan.

When does interest start accruing?

From the date of the loan approval, you have until the end of the month in which the approval is given, plus another full calendar month, before the interest on the $20,000 minimum balance will begin to accrue. This period should allow you sufficient time to select your investments and to draw down and maintain your loan for at least a minimum amount of $20,000.

When do I receive statements?

You will receive quarterly loan statements for record keeping purposes. You will also have access to view your loan details 24/7 via our secure client service website, GearUp.

What is a margin call?

If the current value of your portfolio falls, your current loan balance (the amount you have borrowed from Macquarie) stays the same but your current gearing level will rise. If your current gearing level rises to a level above your maximum gearing level, a margin call occurs. You are responsible for monitoring your loan for margin calls.

What is the buffer?

The buffer is a percentage which is added to your market-based limit to help prevent margin calls occurring due to small market fluctuations. The buffer for the Macquarie Margin Loan is currently 5% of your total portfolio value.

How do you calculate how much a portfolio has to fall to receive a margin call?

You can use a very easy formula to calculate what the portfolio value needs to be to incur a margin call:

Loan value ($) / (Maximum LVR% + buffer%)

To show how this works, let's have a look at the following example:

Current portfolio value	$100,000
Current loan	$50,000
Current LVR	50%
Maximum LVR	70% (due to the securities selected at the time of investing
Buffer	5%

Using the above figures:

$50,000 / (0.70 + 0.05) = $66,667

Therefore, the portfolio value would need to fall by $66,667 (this is a 33% fall in value from $100,000).

How do I satisy a margin call?

You have a number of options to satisfy a margin call. Find out more about how to manage a margin call.

How can I avoid margin calls?

There are a number of things you can do to reduce the risk of margin calls, such as only borrowing within your capacity, diversifying your investments and ensuring you have a stable cashflow to meet interest payment obligations. Read more about how to manage risk.

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