Key takeaways
– A house call is a demand from your brokerage to deposit cash or marginable securities to cover a shortfall in a margin account (a specific type of margin call).
– House calls happen when your account equity falls below the maintenance margin required by your broker (FINRA sets a 25% minimum, but many brokers require more).
– Regulation T generally allows you to borrow up to 50% of the purchase price of the first margin stock, but firms can impose stricter limits.
– Brokers can liquidate positions without further notice if you don’t meet a house call; some firms require immediate payment, others give a few business days.
– Practical prevention: keep a buffer above maintenance, set alerts, diversify, and understand your broker’s margin rules.
What is a house call?
A house call is a margin demand issued by a brokerage firm requiring an account holder to deposit cash or margin-eligible securities to bring the account’s equity back up to the broker’s maintenance requirement. It typically follows losses in securities purchased on margin. If the shortfall isn’t covered in the time the firm allows, the broker may liquidate positions—sometimes immediately—to satisfy the requirement.
How margin accounts work (brief overview)
– Initial margin (Regulation T): For most brokers, Regulation T lets you borrow up to 50% of the purchase price of the first stock you buy in a margin account. Brokers may set a lower initial loan percentage.
– Maintenance margin: After you buy on margin, FINRA requires firms to maintain at least 25% equity of the total market value of margin securities, but individual brokerages often impose higher minimums. This maintenance requirement is what triggers a house call when breached.
– House rules: Brokers publish their margin schedules and maintenance percentages; these can vary by security and account type (e.g., standard margin vs. portfolio margin).
How a house call is triggered — math and examples
Formula: A margin call (or house call) is triggered when:
Equity / Market Value < Maintenance Requirement
For a long position:
Equity = Market Value − Loan
Example 1 (Reg T & FINRA minimum):
– Buy 100 shares at $100 = $10,000. Borrow $5,000 (50% initial), equity = $5,000.
– If the maintenance requirement is 25% (FINRA minimum), find the price P that triggers a call:
(100P − 5,000) / (100P) = 0.25
Solve: P = $66.67
So if the share price falls below ~$66.67, the account equity falls below 25% and a margin/house call occurs.
Example 2 (higher house requirement):
– Same $10,000 purchase and $5,000 loan, but broker maintenance = 30%:
(100P − 5,000) / (100P) = 0.30 → P = $71.43
With a 30% requirement, the call comes sooner (price < $71.43).
Key practical point: a higher maintenance requirement means the price can fall less before a call is issued.
What happens when prices fall and you bought on margin
– If market value falls, equity falls by the same dollar amount. If equity as a percentage of market value crosses below the maintenance threshold, the broker issues a house call.
– You have the options to (a) deposit cash, (b) deposit margin-eligible securities, or (c) sell securities to reduce the loan. If you don’t act, the broker can sell positions (including non-marginable ones in some cases) to restore required equity—often without prior consent or notice.
Examples of brokerage house-call rules (illustrative)
– Fidelity: Maintenance requirements vary by security and account type; Fidelity’s margin maintenance requirement can range from about 30% up to 100% (for some positions); Fidelity’s published policy gives clients five business days to meet a house call, but the firm may cover any call at any time and may begin liquidations sooner. (See Fidelity margin docs.)
– Charles Schwab: Schwab typically uses a 30% maintenance requirement for equities (varies by security). Schwab’s policy states house calls are due “immediately,” meaning the firm can demand immediate deposits or begin liquidations.
(These are illustrative; always check your broker’s current margin schedule and documentation.)
Practical steps — how to avoid house calls
1. Maintain a buffer: Keep equity well above the minimum maintenance requirement (e.g., 10–30 percentage points higher than the broker minimum).
2. Know your broker’s rules: Review your broker’s margin handbook/margin schedule—maintenance requirements, marginable securities list, and timeframes for meeting a house call.
3. Use alerts and monitoring: Set price and account-balance alerts so you’re notified of rapid drops.
4. Reduce leverage: Borrow less than the maximum allowed. Buying fewer shares or using smaller leverage reduces the chance of a call.
5. Diversify: Avoid concentration in a sinking security that could trigger a call.
6. Avoid margin for highly volatile or illiquid securities: These often have higher maintenance percentages or are non-marginable.
7. Consider portfolio margin or alternative structures only after understanding higher complexity and different risk metrics.
Practical steps — what to do if you receive a house call
1. Act promptly: Brokers may require immediate action; delays can result in forced liquidation.
2. Determine the shortfall: Check how much additional equity is required and by when.
3. Deposit cash or marginable securities: Cash is fastest; depositing other margin-eligible securities is another option. Check whether your broker allows settled funds or if there is a waiting period.
4. Sell marginable positions: If you choose to sell, prioritize non-core holdings and be mindful of tax consequences and transaction costs.
5. Contact your broker if you need guidance: They can confirm the amount due, deadlines, and acceptable deposits. Don’t assume extensions will be granted.
6. Document everything: Keep confirmations and communications in case of disputes.
Risks and broker rights
– Forced liquidation without notice: Brokers have the contractual right to sell securities in your account to meet margin requirements and are not obligated to provide extended notice.
– You’re liable for shortfalls: If liquidation doesn’t cover the loan, you still owe the remaining balance.
– Margin interest and costs: Borrowing on margin incurs interest; frequent borrowing can increase costs and magnify losses.
FAQ (short)
Q: Is a house call the same as a margin call?
A: A house call is a type of margin call issued by the broker based on its house (internal) maintenance requirements. “Margin call” is the broader term that covers regulator- and broker-triggered calls.
Q: Can a broker liquidate my positions immediately?
A: Yes. Many broker agreements permit immediate liquidation to meet margin requirements; some brokers give a short cure period (e.g., five business days), but they can act sooner.
Q: How much can I borrow to buy stock initially?
A: Under Regulation T, up to 50% of the purchase price of the first stock in a margin account can be borrowed, though firms may be more conservative.
Bottom line
A house call is an urgent demand from your brokerage to restore minimum equity in a margin account. It results from losses on margin positions that push your account below the broker’s maintenance requirement. To minimize risk: understand your broker’s margin rules, keep a comfortable equity buffer, monitor positions closely, and act promptly if a call is issued. Because brokers can liquidate positions—and you remain responsible for any remaining deficiency—margin trading requires careful risk management.
Sources and further reading
– Investopedia. “House Call.”
– FINRA. “Margin Regulation.”
– U.S. Securities and Exchange Commission. “Investor Bulletin: Understanding Margin Accounts.”
– SoFi Learn. “Margin Calls: Defined and Explained.” /
– Fidelity Investments. “Margin Balances / Margin Policy.” (See Fidelity margin documentation on maintenance requirements.)
– Charles Schwab. “The Charles Schwab & Co. Guide to Margin.” (See maintenance rules and margin guide, page references in broker materials.)
– run specific price-threshold calculations for a portfolio you describe,
– summarize the margin schedule for a particular broker, or
– draft a checklist you can follow if you receive a house call.