NAB Equity Builder - Thoughts/Experiences?

passwordistaco on 13/02/2020 - 00:45
Last edited 13/02/2020 - 09:15

I’m after some thoughts and/or experiences on the NAB equity builder loan.

Info: https://www.nab.com.au/personal/super-and-investments/invest…

Independent review: https://carpedividendum.com/2019/02/14/equity-builder/

Product TLDR
- No margin call P&I loan, secured by cash or shares, over a 3-10yr period.
- Can only access approved/accepted stocks by NAB, and appear to be at there mercy of retaining said stock on their approved list
- Currently 4.3%
- No real time purchase (need to submit a request)
- Looks like a margin loan for the average Joe…

I was considering what the product would look like with an A200/VAS and VGS split. While I have the cash to purchase, I was intrigued with a few benefits - buying a larger holding, leveraging against a no call loan that can be paid down as quickly as possible. I don’t have property that can be leveraged FWIW, and never really considered it.

I’m not familiar with tax breaks/advantages, but perhaps the interest charged is a tax deduction too? On a stock that averages a 7-8% return, paying 4% almost seems OK. But perhaps I’m being naive.

I also know that borrowing money to invest is a big no no from some astute investors..

So I’m curious on thoughts/opinions, and definitely experience - what does this product look like to you? Big red flags to stay away from borrowing to invest? Or does this seem like an almost reasonable option to get a solid ETF portfolio at a cost of 4 (varying)%?

Worth noting - I have not and will not apply til I do a bit of my own research, which includes gathering some real life insight.

Financial

Related Stores

National Australia Bank Group (NAB)
National Australia Bank Group (NAB)

Comments

  • [Deactivated] on 13/02/2020 - 06:39
    +1

    Ive looked into it (i margin loan). The product is a small step into margin lending with limited stock options.
    As a tester to broader margin lending it seems like a good opportunity.
    Interest would be tax deductible
    Borrowing to invest is fine, just know your limits (think investment properties)

  • t_c on 13/02/2020 - 07:02

    I wonder if it will still be 4% promo rate after the 50% haircut, my bet is theyll jack it to 8%.

    • passwordistaco on 13/02/2020 - 09:05

      It’s a 2% fixed discount off the variable rate. Sure it could change, but based on reviews I’ve read from 2017 it seems to of come down from 5.05% in a similar fashion as mortgage rates.

  • sweefu on 13/02/2020 - 11:02
    +1

    Some good info here:

    https://www.reddit.com/r/AusFinance/comments/bck7qh/nab_equi…

  • netjock on 13/02/2020 - 13:11

    It isn't all bad news.

    Pros:
    1. No margin calls.
    2. Looks like no fees (although there are exceptions like if you live in TAS)
    3. Low interest rate.

    Cons:
    1. Margin loans you pay interest and pay your principle when you want. Theory is if you are not paying principle you can use that money to generate further returns.
    2. Transactions is via a manual form (they must be losing a bomb having someone manually process these)
    3. 10 year limit (margin loans can go on forever)
    4. Harder to tax manage. I have a margin loan which the interest is paid by cash paid from dividends so I just get the franking credits to offset my taxes. If you are doing P&I you'll have higher interest at the beginning and lower toward the end
    5. It is unclear if you increase the loan the loan length stays the same which means your repayments will go way up
    6. For Australian shares it is very limited at 43 listed ETF / LICs

    You will have to weigh it up.

    • passwordistaco on 13/02/2020 - 13:41

      Yes totally agree, doesn’t actually look all that bad. Can’t imagine this would be too great for large borrowings. My consideration was around $20,000 or so, just to test it out.

      Feels like a ‘beginner margin loan’. Almost an easier way to get into it.

      Any adverse thoughts around borrowing to invest?

      • netjock on 13/02/2020 - 14:51
        +1

        Always think "if your portfolio drops 50% are you going to be able to not force sale to pay your margin call"

        That is all.

  • samjacksonau on 20/03/2020 - 10:04

    Message on the website:

    Our online application form is currently unavailable
    Given the current market volatility we are prioritising account management activities for our existing customers. As a result we have disabled new account opening.

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