How much can you borrow?
The amount that you can borrow is determined by the securities in your portfolio, their loan to value ratio (LVR) and a credit limit based on an assessment of your financial position.
The borrowing limit is defined as the maximum value your loan balance can reach based on the securities in your portfolio (different from the credit limit, which is a credit assessment limit - see below). It is calculated by multiplying each investment's market value by its LVR. The borrowing limit will fluctuate based on changes in the market value and LVRs.
The credit limit is defined as the maximum value your loan balance can reach, irrespective of whether your borrowing limit is higher than this value. The credit limit you request in your loan application is subject to approval based on assessment of your financial position. As a responsible lender, we will only approve a credit limit which we consider is affordable to you after consideration and verification of your financial circumstances.
After approval, your credit limit will be visible on your monthly statement, and when you log into your account.
What affects your borrowing limit?
Your investments
Not all shares and managed funds are alike. All sectors and industries (such as industrial, media, property, resources and mining) have different risk profiles. Different securities therefore attract different LVRs. BT Margin Lending generally sets LVRs on individual securities that vary from 35% to 75% with a buffer of 10%. However, lending ratios can change at any time without notice and can be reduced to 0%.
Your provider
The loan provider sets the lending ratio of every eligible investment, which sets the size of the buffer. For example, BT Margin Lending generally sets lending ratios on individual securities that can vary from 35% to 75% with a buffer of 10%. However, lending ratios can change at any time without notice and can be reduced to 0%.
Your diversification
A diversified portfolio presents a lower security risk for the lender than a portfolio that is dominated by a single security. If you are planning to hold a portfolio that is not diversified the LVR assigned to your securities may be reduced.
The market
Your borrowing limit changes according to fluctuations in the market where LVRs are applied to the value of your investments. As the market value of your investments goes up or down, your borrowing limit will rise or fall.
Example:
If you wanted to invest $10,000 in a managed fund that was assigned an LVR of 70%, the amount BT would lend you would be $7,000 (subject to your credit limit). You would then be required to contribute the remaining $3,000.
