What is a House Maintenance Requirement
The house maintenance requirement is the minimum margin account equity required by a brokerage firm based on Regulation T and the firm's discretion. The house maintenance requirement will often be higher than the maintenance margin set out by the Federal Reserve's Regulation T, which stipulates that an equity level of at least 25% must be maintained. A brokerage may also set different maintenance requirements for different account holders at the firm. A 30% house maintenance requirement is typical and 40% is not unusual. While stocks are the security most commonly purchased in a margin account, many other securities such as mutual funds Treasuries, corporate bonds and options may be purchased "on margin" subject to varying purchase and maintenance requirements.
BREAKING DOWN House Maintenance Requirement
While stocks are the security most commonly purchased in a margin account, many other securities such as mutual funds Treasuries, corporate bonds, and options may be purchased "on margin" subject to varying purchase and house maintenance requirements. Brokerages have broad discretion in establishing, changing and enforcing margin and maintenance requirements above and beyond Regulation T. For example, even if a particular stock is marginable by securities regulations, a firm may require more than 50% equity at purchase. Brokerages may also require that in concentrated margin positions, for example, a margin account that is 60% or more invested in a single stock, clients maintain 50% margin.
When higher margin requirements are in place, a margin call is more likely to be generated when the value of securities in the account decrease. If the account holder is unable to meet the margin call, assets in the account will be liquidated, with or without consultation with the client.