NAB Equity Builder - too good to be true?

and when interest rates go up?

 

Ofcourse, when you borrow money you need to be mindful of interest rates going up. What I meant was due to the loan being P&I and no margin calls and current dividend rates higher than the loan rate you could use all these factors to your advantage to build some wealth.

I think you would find it hard to beat that margin loan rate elsewhere. For anyone looking to invest in Australian sharemarket and happy to use some leverage this is a good deal.

Cheers,
Oracle.

 

Yes, as a beginner I'm pretty excited about this actually. I think one of the main advantages that property has over shares is leverage. Not having the risk of margin calls makes leveraging into shares much more attractive.

If the interest rates go up, I'd do the same as I would've done with property:
1) Build a buffer for such times
2) Reduce LVR to lower repayments
3) Wait/pray for dividend to increase
4) With shares you also have the ability to sell part of the holdings. However, no ability to add value like with property

The only concern here is if NAB de-lists the shares that you own.

 

How likely is it that NAB will delist shares that they have done their research on and have them on the approved list for this loan product? Take the approved LICs for example, are they likely to delist them?

 

I suppose there is always a chance for them to delist during the next market crash in which case it'll be really painful for a buy and hold long term investor.

 

You cant just delist shares on the stock market because NAB feel like it
there are laws governing around it and NAB cant do jack they just a market operator not the owner of the listed entity.

A public company get delisted on the ASX if they go into bankruptcy or move to another stock exchange and wish to delist from ASX or taken private otherwise it stays listed.

 

Lol can't tell if you're trolling. He's referring to delisting from the approved list of investments for the loan product.

 

I have been looking at this product to get some diversification away from property for a while. I have just been moved to a contract at work so am looking to sell up a property and move the funds into this to lower my risk. Personally I dont think there is too much risk of delisting, I note on the possible investments they are already flagging particular shares that they are close to max exposure on, stay away from them and the risk is low I believe. 50k startup, with high leverage, no margin calls and you own the portfolio after 10 years while dividends/tax incentives go close to maintaining the costs whats not to like?

 

That is fairly clear-cut, there are guidelines which all banks and lenders use to determine if the product is of an investment grade and lend money toward

These get review if there is a major shift in the business fundamental, they get remove and added based on these criteria

 

Yeah the problem is if you have made a profit on the shares you are forced to sell this will trigger CGT at a potentially awkward time.

 

I like the look of this as well. I continue to invest monthly in investsmart SMAs but would like to invest in this when the market corrects.

 

Or if the market has tanked you might be forced to sell at the bottom

 

Just wondering how it would work with accumulation.

Can you keep adding funds and then applying for the loan to be increased? Or can you apply for the maximum loan you can service and then drawdown as you have enough equity to meet the initial margin?

 

This is my understanding of how it works... might make the numbers a lot more favourable. Just feels funny since we are always trying to reduce non-deductible debt, and then here comes this thing adding a big ol' chunk of it.

 

What's you understanding of how it works Phil? Say I have 50k and can deposit an extra 10k month. How would I go about structuring this?

This is all deductible debt btw.

 

I gather that you can periodically draw down on your equity as with property, but, I may have made this up.

 

So I gave them a ring about the product an spoke to 2 very switched on ladies. They openly admit the product is designed more as a set and forget type of deal i.e. you tip your money in, gear up and wait 10 years, however there is the option when initially opening the account to apply for the maximum limit your servicability will allow and start to tip in money and gear up progressively until you hit your pre-approved servicability limit in repayments.

They also told me the introductory interest rate is only if you mention uncle Noel's article...they have been very busy since he put in a good word apparently.

 

this product got my attention while reading Noel's post....I've hardly seen Noel's recommending a product...Plus my understanding is interest rate selected is for the loan term (15 yrs being max).

'One of the best wealth creation devices I've seen': Noel Whittaker on the NAB Equity Builder

One could always borrow the require LVR from other property as separate split and borrow rest via this product. Hence 100% loan deductible....only thing i would have liked would be to switch between the options...but again in 15 yrs term it may not be necessary...if I would not be protecting my borrowing power for property then this would be good option.

 

The gearing via this product is P & I so the P part of the gearing repayments is not deductible.

 

didn't mean the P part....I am referring 30% cash/savings (can be funded from other property) or something and 70% by this product. P is not deductible in any case....