NAB Equity Builder - too good to be true?

I am with NAB EB @3.75% till now.

 

What mix did you eventually chose?

 

Question for @Terry_w

When debt recycling, I believe that if you wanted to withdraw and pay back only part of the investment loan to release some capital, it is considered to be paid back in proportional parts, resulting in a reduction in what can be claimed as a tax deduction for the life of the loan. As a result, you need to split it before withdrawing and then withdraw the full amount from just that loan you split off from the rest of the investment loan, leaving the other part untouched.

How this would affect someone using NAB Equity Builder and wanting to release some of the capital? For instance, say you had 90k, 30k yours, and 60k borrowed. Assume you were required to maintain this LVR, and you want 10k released, so ending up at 60k, 20k yours, 40k borrowed.

If you sell down 30k of assets to pay back 20k of the loan and release 10k capital, would this affect your tax-deductibility?

Q2. Would anything here be different with a regular margin loan product, which is interest-only?

 

See my tax tip about the exception to the rule of splitting before repayment

 

Thanks, @Terry_w

Thread for anyone else who reads this

 

I saw this recently also

Fundlater - InvestSMART

 

That's not a bad interest rate either. 5% for a small short term loan. Might do some more reading. Cheers for posting

 

No.

It's a fixed $500 charge to borrow $6k and 20 months to pay it back....

0.55% fee is on top of ETF (investment) MER of whatever product they lock you into, plus brokerage fees.

The whole invest 4k to borrow 6k seems like just a one time drug deal to get you to the minimum 10k for the platform.

Wraps and why advisors love them — Passive Investing Australia

 

More like 9.5% interest rate. And fees on top.

 

NAB Equity Builder is now @4.5%. It will probably go higher.

 

Now 6.25% pa

 

wow!

 

All Good, it's tax-deductible...right

The money you borrowed is also decreasing in real terms by inflation

Podcast - Terry Waugh - Debt Recycling - Aussie Firebug is a good option

 

I took up the chance to borrow at the nice high rate last week.
Sold some crypto to fund the deposit so I figure the timing makes up for the interest rate.

I'd rather buy cheap assets with expensive rates than buy expensive assets with cheap rates.

 

For those who can't borrow to invest via their home loan/s, NAB EB remains competitive.

If you're investing long-term and have the cash flow to hold, it's still worth considering

 

Looks like its now up to 6.50% pa

 

Yep, they apply rate increases within the next 1-2 business days. Haven't been with them since a rate drop, but I'm pretty confident they may move a bit slower to pass those on

For those in the 37% tax bracket, with 2% MLS on top, you're looking at a real rate of 4% after tax back on the 6.5%.

 

Some nice dividends coming in Jan to help offset the interest.

Some other things to help with cashflow for those on P&I:
1. If the recent sharemarket gains put your LVR under 65%, you can change to a 15 year loan payback period by submitting a new loan form (like refinancing).
2. If you went under LVR 30% you can change to interest only
3. After asset growth + principal payments you may get approved to draw the excess cash out. May be possible to use this for repayments if kept in an investment only account, but tax advice is needed. Alternatively it can be used to help debt recycling (sell some shares to help repayments, then re-invest the borrowed money).

We haven't needed to do any of these yet, but 2023 will be another long year so we'll keep these up our sleeve while the buffer builds up from those principal repayments.

 

I wonder how Ben is tracking

Aussiefirebug may need to do an update

Podcast - NAB Equity Builder - Aussie Firebug

 

If Ben has held those ETFs from COVID he'll be sitting pretty.

I've used all of my NAB EB fund allowance via a drip strategy over the last 6 months and am up about 6% in returns (incl dividends) with a VAS/VTS/VEU/VVLU strategy.

My question for any NAB EB users, can I put extra $$ into my account and have this essentially 'offset' the NAB EB loan?

For example, say I have a 50k loan with NAB EB over 15 years. If I transfer in voluntarily $2000 to sit in 'available funds' in my NAB EB account, does the interest of 6.75% get calculated on $48000 or $50000?

I'm aware 'redrawing' funds from available funds requires a minimum of 2k in the account, and would be a slow process that isn't instant; however, if I have funds offsetting a home loan at a lower rate, I'm thinking of whether it would be wiser to 'offset/use redraw' from the higher NAB EB rate? (I know debt recycling is a better solution, but it wasn't possible at the time).