NAB Equity Builder - too good to be true?

Discussion in 'Sharemarket Investing Platforms, Tools & Services' started by BPhil, 27th Nov, 2017.

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  1. BPhil

    BPhil Well-Known Member

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    I have played around a bit, including using both together.

    The enhanced returns through using leverage are dampened a lot by the principal repayments which kill your yearly DR.

    Going down to 60% lvr helps a bit as you can extend term to 15 yrs instead of 10, paying less principal.

    But best of all was to go down to 30% lvr, as NAB will apparently let you suspend principal. So a mildly leveraged, positive cash flow DR becomes possible. This was the best overall return and cash flow in my modelling.
     
  2. AndyPandy

    AndyPandy Well-Known Member

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    @BPhil what do you think of the rate? 4.55%
     
  3. BPhil

    BPhil Well-Known Member

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    Lowest it's been so far... Would always prefer lower, but hard to complain. Think the ability to leverage makes it worth it, especially given its so much lower than margin rates.
     
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  4. Luca

    Luca Well-Known Member

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    Hey Martin, I have tried to run a couple of scenario on this strategy but I cannot make up my mind why this should work fine. You will need cash to finance the 2 loans at the end of the year. I assume the trick is in assuming the shares you buy at least double in 10 years time?
     
  5. BPhil

    BPhil Well-Known Member

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    That scenario needs some external cash flow (eg salary) to sustain it.

    You can suspend principal payments if you drop below 30% lvr on this product.
     
  6. Paddi

    Paddi Member

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    How do you use my existing shares as security? The form says it must be registered in the name of NMS Nominees P/L. How does this work practically?
     
  7. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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    This is like old system title. they hold title, as trustee, while there is a loan in place.
     
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  8. Paul@PAS

    Paul@PAS Tax, Accounting + SMSF + All things Property Tax Business Plus Member

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    Trustee is a custodian trustee. Their rights are limited to the extent of the loan discharge usually.
    The Opes Prime case in 2008 indicates risks if the custodian trustee doesnt fulfil their obligations to hold each client property. Opes prime covered losses of one client with anothers assets. In the end assets were well short
     
  9. Blueskies

    Blueskies Well-Known Member

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    Having a read of the PDS for this product, regarding the suspension of principal at LVR <30%:

    7.10 If during the loan term, the current LVR in respect of a loan is less than 30, you may request that principal suspension apply to that loan. If we agree to your request, principal suspension will apply from the start of the following calendar month.

    7.11 If at any time during the loan term, principal suspension applies to the loan and we determine that the current LVR in respect of the loan is 40 or higher, we may terminate the application of principal suspension. We do not need to give you prior notice of this, but will notify you promptly after.

    Need to be aware that if you do set up a loan with initial gearing at 30% LVR it would be possible during a sharemarket correction for the LVR to rise above 40% and force you back onto P&I.

    Sharemarket would have to pull back by 25%, which means you would have lost nearly the entire borrowed amount, so not surprising they might want you to start paying back the principal in that scenario. It is kind of like a watered down margin call.

    Not saying this is a deal breaker for someone wanting to use this product, just something to be aware of.
     
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  10. apk

    apk Well-Known Member

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    Did anyone here checked your credit file for NAB equity builder and confirm its reported as 'Overdraft' please

    Also wondering overdraft is the term for this type of borrowing?
     
  11. Glebe

    Glebe Well-Known Member

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    I have a question regarding Equity Builder.

    Instead of cash, if I were to use as my deposit a particular security, say "ETF1", am I limited to borrowing to invest only in "ETF1" or can I invest in other securities? How does LVR work in such a situation?
     
  12. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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    Others too.

    Lvr will be on overall loan over securites
     
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  13. luckyP

    luckyP Well-Known Member

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    I would like to revive this thread. If you have taken the Nab equity builder product how does it work out for you?
     
  14. MWestern

    MWestern Well-Known Member

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    Would you be able to share your model by any chance? I am considering this option, but from my basic excel skills (which could be off) I'm only seeing around a 1% benefit to levering in. Not really worth it in my opinion.
     
  15. Hodor

    Hodor Well-Known Member

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    Just went to apply and new customers aren't been accepted currently so they can serve their current clients according to the website.
     
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  16. fritzsticker

    fritzsticker Member

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    Hi Frits

    Right now applications are closed due to market volatility and the virus, we aren’t too sure when we will be able to reopen them.

    Kind regards,

    Ryan
    NAB Equity Lending

    Level 5, 500 Bourke Street, Melbourne, VIC 3000
    t: 1300 135 145
    e: [email protected]
    w: nabmarginlending.com.au
     
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  17. fritzsticker

    fritzsticker Member

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    Are there any type of margin lending like NAB equity builder or cheap personal loan with % rate similar to Nab EB??

    Cheers
     
  18. oddshapes

    oddshapes Well-Known Member

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    I've been looking, found a product by leveraged.com.au called direct investment loan at 4.74%
     
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  19. fritzsticker

    fritzsticker Member

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    Cheers buddy. Read the PDS, is $20k the minimum to invest on a share? As with nab rquity builder, $10k is the minimum to invest..

    Cheers
    Fritz
     
  20. asw1

    asw1 Well-Known Member

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    Thought I'd revive this thread.
    Has anyone using the NAB EB taken up the principal suspension option?
    How does it work, do you keep paying interest on the outstanding loan amount each month (payments remain the same)?
    Or does the interest payment reduce over time as if you had made payment on the principal, even though it isn't reducing?
    Also what happens at the end of the loan? Do you have to then make a lump sum principal payment to cover the outstanding balance?
     
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