Margin Loans Help Buyers Close Deals

July 23, 2013

Margin loans for short-term financing can help potential home buyers get cash fast to close a deal or win a bidding war — and an increasing number of people are turning to them for a quick fix. 

"A person with easy access to cash may have a leg up over someone who has to have long-term financing," explains Tucker Watkins, a private wealth adviser with wealth-management company Ameriprise Financial Inc. 

The product offers some pricing benefits, as there are no closing costs, no property appraisal is required, there are no prepayment penalties, and borrowers do not have to make monthly interest payments.  There also are tax benefits to consider, given that interest on a margin loan generally is tax-deductible. On the other hand, a buyer who cashes out stocks to make a down payment may have to pay capital-gains taxes. 

"Avoiding capital gains is often a reason why someone may use a margin loan instead of selling a security," says Watkins.

Source: "For Faster Cash, Buyers Live on the Margin," The Wall Street Journal (July 19, 2013)

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