If you want to borrow money, many will tap into their HELOC, but margin rates are often lower AND margin interest expense can be used to offset investment income. If you have $3,000 in margin interest expense and $5,000 in investment income, you can deduct the entire $3,000. If your margin interest expense exceeds investment income, you can carry forward any amount over the investment income.
An excellent HELOC rate is currently (August 2022) around 3.75-4.00%. If you use InteractiveBrokers, rates are 3.83% for IBKR Pro for any amount below $100K. Move up to greater than $100K but below or equal to $1M, and the rate is 3.33%. IBKR is the most competitive in this space. If you don’t want to move from your existing broker, call them and ask to negotiate a lower lending rate.
On a $200K loan balance, obviously you will save $840 per year if your broker charges 3.75% (3.75-3.33) x $200K. But most likely your broker charges north of 5%.
