How do I apply for a CommSec Margin Loan?
Opening a CommSec Margin Loan is easy. Read our FSG, PDS and Terms and Conditions before you start, and then just follow these steps:
- Step 1. Complete the online application by clicking on the “Apply Now” button on the right hand side of this page.
- Step 2. Complete the fields in the declaration form, print and sign.
- Step 3. Email, fax or mail in the declaration form to us with any supporting documents required.
If you wish to prepare the supporting documents in advance, refer to the FAQs on our support page for the full list of application requirements depending on your account type: individual/ joint, company, trust. Once received, your application will be assessed and in most cases, your account will be opened within 1–2 business days. If additional information is required, we will contact you.
Once your Margin Loan facility has been approved and processed, your new Margin Loan will appear as a trading account beginning with "7..." under your Portfolio Summary and you will be able to transfer the initial contribution of cash or existing securities and start using your loan.
For additional information, contact our Account Managers on 13 17 09 (8am to 8pm, Sydney time, Monday to Friday).
My loan has been approved. How can I start using it?
Once your Margin Loan has been opened, you will notice that a new account number starting with "7..." has appeared in your Account Summary page. To get started:
- Step 1. Transfer your loan collateral
You can transfer existing shares or managed funds as the initial collateral for your loan. Or if you are starting a new portfolio, you can begin by transferring cash from your nominated bank account using our online funds transfer request.
- Step 2. Decide what to invest in and how much to borrow
Your ability to borrow will be determined by several factors, such as the Loan-to-Value Ratio (LVR) of your existing securities, the LVR of the new investments you would like to purchase, and your credit limit. You can simulate different scenarios using our “What If” Calculator, Please Note: the "What If" Calculator is only available if you have a Margin Loan Trading Account.
- Step 3. Purchase your new investments
If you are buying shares, you can simply place an order via the CommSec website or give your instructions to one of our Account Managers on 13 17 09.
If you're investing in managed funds, a new application and/or additional investment form will be required.
- Step 4. Choose an interest payment option
By default, your loan will be set to variable interest paid monthly in arrears. You can choose to have interest taken from your bank account or capitalised onto the loan. You can also fix part or your entire loan balance and select to pay in advance or arrears.
We lend different amounts against approved securities and this may vary based on the composition of your portfolio. This is known as the loan to value ratio or ‘LVR’. The LVR for each accepted equity is set out in our approved security lists and states the borrowing limit which we determine and may change at our discretion.
The three main forms of collateral used on a margin loan are:
- ASX-listed shares — choose from over 450 approved shares
- Managed funds — choose from over 1450 approved managed funds
- Cash:
- Transferring cash into your margin loan will reduce your loan and increase your borrowing power
- Alternatively you can keep cash in your Commonwealth Direct Investment Account and at the same time request to lodge it as security on your margin loan.
How do I transfer shares to my Margin Loan?
Before requesting the transfer of your shares, please ensure the existing registration details (name and address) exactly match the details you have supplied for your Margin Loan. If the details don’t match, please refer to Option 4 below:
- Option 1: Transferring from your existing CommSec equity account
If you wish to transfer stock to your Margin Loan from your existing CommSec trading account, you make a request over the phone on 13 17 09, 8am to 8pm (Sydney time), Monday to Friday. This transfer can take up to 24–48 hours.
- Option 2: Transferring stock from another broker
If you wish to transfer stock from an external broker, please complete and sign the Broker to Broker Transfer form and return it to us to process.
- Option 3: Transferring Issuer Sponsored Stock
To transfer Issuer Sponsored stock, you need to provide us with a signed written request and your latest holding or dividend statement.
- Option 4: Transferring Issuer or CHESS (Broker) Sponsored Stock in another name
To transfer stock onto your loan that is not registered in the same name, you have two options:
i. You can either complete and return to us an Off Market Transfer form to change the registered name of your stock, to be the same as your Margin Loan (Fees of $54 per Off Market Transfer apply), or
ii. You can establish what is called a “Third Party Mortgagor” relationship for your loan whereby security is held on a separate trading account but is still counted towards your loan collateral. To find out more or to ask for this facility be established, please contact us on 13 17 09.
The forms required for Options 1–3 above can be returned by fax or post as indicated. Alternatively, you can scan and email them to marginloan@commsec.com.au. Off Market Transfer Forms must be sent back to us as originals. Most transfers take 24–48hrs.
Please note: Before the transfer, you need to ensure the existing registration details (name and address) exactly match your Margin Loan. After the transfer, you may need to contact the share registry to update your dividend and communication details. This is usually required whenever you are transferring stock to a new HIN.
How do I transfer managed funds to my Margin Loan?
To transfer existing managed funds, you need to complete and post to us an original completed Standard Transfer Form plus one of the following:
- an original completed new managed fund application form
- an copy of a recent holding statement
The forms can be posted to:
CommSec Margin Lending
Locked Bag 34
Australia Square NSW 1214
How do I refinance an existing Margin Loan held with another provider?
If you do not already have a CommSec Margin Loan, you need to apply for one and complete the 'Refinancing' section of the application form.
If you already have a CommSec Margin Loan, simply complete and return the Refinance Request form. In both cases, you will need to attach a copy of your existing Margin Loan statement.
Please ensure that your CommSec Margin Loan has a sufficient credit limit to allow for the refinance.
You may also find that lending ratios on our approved securities lists may be different to what is offered by your existing lender. You can confirm this by checking our approved security lists or using our WhatIf simulator when you log into your Margin Loan. If you wish to discuss your options with an Account Manager, contact us on 13 17 09 (8am to 8pm Sydney time, Monday to Friday).
Can I use my margin loan for frequent trading?
Yes. A CommSec Margin Loan comes with a dedicated CommSec trading account and is suited to frequent traders. You can place orders through the website, your mobile or over the phone. If you need real-time streamed data, CommSecIRESS offers extensive market information, watchlist and alert capabilities.
Our straight-through processing system can have your trades on the market within seconds1. When a buy or sell order executes, your loan summary is instantly updated, which means you can access your net settlement position at any point in time. For example, when a sell order executes, your funds available will automatically increase, giving you the purchasing power for another trade immediately.
1We will make all reasonable attempts to process your online order instructions as quickly as possible, however there may be delays due to order verification or authorization – refer to our T&C’s for details
What is the difference between credit limit and funds available?
Funds available
The funds available amount is determined by the difference between the total lending value of your portfolio and your current loan liability. You can think of it as:
- Cash available to draw down from the loan to your linked bank account for other investment purposes.
- Free equity that provides you with borrowing power to buy additional stocks. For instance, if you wish to buy a stock with a 60% LVR, the funds available will need to cover the other 40% as a minimum.
- An additional buffer for your loan before a margin call in case the market falls.
Credit limit
The credit limit is similar to the credit limit that you nominate for your credit card, which is the amount you nominate as the maximum amount that you wish to have the potential to borrow. You are not required to use the full amount. Once you exceed your credit limit, you either need to nominate a higher credit limit, or reduce your loan balance within the required timeframes. The credit limit alone does not give you borrowing power. This is determined by the amount of acceptable collateral lodged on the loan.
What are the potential risks of investing with a Margin Loan and what is a margin call?
There's no doubt that every investment involves some risk. A Margin Loan is a powerful financial tool that allows you to create a larger market exposure than you could otherwise afford using just your own capital, thus multiplying the effect of price movements on your initial capital. The key risks of risks of margin lending include:
- Adverse market conditions may result in your portfolio value being reduced and subsequently your gearing level may increase, triggering a margin call.
- We may reduce or remove the LVR applied to some or all of your investments, or to your portfolio as a whole at any time, which may result in a margin call.
- The variable interest rate may increase resulting in higher interest costs, which may exceed the portfolio’s return.
- Margin calls may require investments to be sold by you or us quickly at unfavourable prices or may trigger unwanted capital gains if you are unprepared.
- Tax legislation or marginal tax rates may change and have an adverse impact on your tax position.
- The loss of any assets if they have been mortgaged as security or to provide security to the margin loan.
- Default events or enforcement events occurring and the consequences of such an event occurring including all amounts owing becoming immediately payable. Refer to our PDS for the details on Default events
- Your financial situation may materially change, adversely affecting your Margin Loan.
- Adverse market, and or stock specific conditions may result in the value of your security being insufficient to repay your loan.
As highlighted above, a margin call is one of the risks with a Margin Loan as action must be taken by you when your portfolio is underperforming, but the margin call process is also one of the benefits of investing through a Margin Loan.
Unlike if using your own cash or unsecured borrowed funds to invest, investing through a Margin Loan gives you clear visibility of key performance indicators and action triggers for your portfolio. Your loans gearing ratio and buffer/margin call trigger points allow you to closely monitor the performance of your investments, so you can quickly identify underperforming assets, This provides you the opportunity to liquidate them before any further loses are incurred.
If a margin call does occur you are required to reduce your gearing level by either:
- reducing your loan balance, or
- increasing the level of equity in your loan.
Just as you can top up your Margin Loan with extra cash when a margin call occurs, you can withdraw surplus cash when your portfolio is performing strongly, if your gearing levels and credit limit permit. A margin call doesn’t change what price you paid for your securities, but if you don’t have surplus cash to adjust your gearing levels when required, you may be required to sell some of your securities at a less than preferred price.
How do I avoid margin calls and manage the risks of a Margin Loan?
If you notice your gearing is getting too high and approaching or already in buffer, take action before a margin call is triggered.
When making an investment choice in equities or managed funds, you should be aware that prices fluctuate from day to day, and some shares and funds will turn out better investments than others.
When using a Margin Loan, you need to consider the investments risks inherent in the asset you are buying, as well as the additional effects that gearing creates. Fortunately, there are ways you can get the risks under control. It is easy to address most risks by following these simple steps:
- Understand your strategy and stick to it
Before you start, decide on the amount of capital to commit; your investment or trading strategy; your choice of industry/asset type; entry and exit prices; and the amount you would like to borrow. A disciplined approach can help you make better investment decisions.
- Research your securities
When you purchase a stock, you become part owner in a business. Use the CommSec company research tools and analyst reports to find out more about the financial health and metrics of your holdings.
- Stagger your entry into the market
You can reduce the risk of incorrectly timing the market by using “dollar cost averaging” —investing the same dollar amount over regular periods of time. If you prefer managed funds, you can automate this with a Regular Gearing Plan. Or if you prefer stocks, you can use conditional orders and price alerts.
- Diversify
Reduce the risk from individual stock price movements or LVR changes by spreading your investment across different companies, assets and industries. A fall in the value of one investment may be offset by a rise in the value of another. When you hold 5 or more accepted securities, you can also take advantage of CommSec Portfolio LVR to create additional buffer and access bonus stocks.
- Borrow less than the maximum
You can control the multiplication effect of gearing by using only part of your potential funds available to borrow. Lower gearing will leave you with a greater buffer to protect you against a margin calls triggered by a price drop.
- Control your cash flow
Estimate your interest payments and ensure you can cover them. Reinvest income from dividends to offset your interest costs and loan principal. Pay your interest through a bank account rather than capitalising to the loan — capitalised interest will increase your loan and result in higher interest expenses over time.
- Fix your interest rate
Transfer part or your entire loan to a fixed rate for a selected term — this way you will eliminate the risk of rising interest expenses for the chosen term.
- Monitor your investments
Our website offers you a suite of tools to monitor your portfolio and loan status. You can use price alerts to notify you when a stock has reached a predetermined price, and conditional orders to create an automated stop-loss order instruction.
- Use Options for protection
Exchange Traded Options can allow you to keep your existing shares over periods of market uncertainty, while protecting you against the loss from falling share prices.
- Take action early