NAB Equity Builder – An Ultimate Guide
NAB Equity Builder – An Ultimate Guide

NAB Equity Builder – An Ultimate Guide

Australians are no strangers to borrowing money or to leverage. Australian household debt accounted for 129.2 % of the country’s Nominal GDP in December 2020, coming in second to Switzerland. So why should you use a NAB Equity Builder?

A large portion of debt is held in real estate in Australia. I am a huge supporter of real-estate investing; however, you need a large amount of capital to get on the ladder. An easier way to leverage your money is through the stock market. Now there are two easy ways to do this, either through a Margin Loan or a NAB Equity Builder Loan.

The benefit of lending for equities is the opportunity it provides to increase your investment exposure. Essentially, borrowing allows you access to more funds, giving you the potential to make additional investments you may not have been able to make otherwise. This can magnify market exposures with the potential to increase returns or allow new purchases to diversify your existing portfolio. But it can also backfire and magnify your losses on money that is not yours. 

Lending can also have tax benefits attached, as you can claim interest or other costs as a tax deduction.

For this type of lending, you need to have a risk appetite and ensure you are seeking professional help and doing your own research prior.

Margin Lending

Margin lending is a type of loan that allows you to borrow money to invest in the share market. Where you can use your existing shares, managed funds and/or cash as security.

The amount you can borrow is based on your financial position as well as the allowable Loan to Value Ratio (LVR). The LVR is the amount of your loan divided by the value of the shares or managed funds being used as security.

The biggest downside of a Margin Loan is when the value of your security drops in relation to the loan amount, and you may exceed the maximum LVR. Exceeding the maximum LVR will trigger a ‘margin call’. Receiving a margin call from the lender you’ll be required to reduce your loan amount. This is done by either contributing additional security or be forced to sell part of your investment until your LVR is below the maximum. 

Usually, you will get a margin call when the equity market is falling or the value of the business you have invested in falls. If you can’t fork up the extra needed security to lower your LVR, the bank could sell your shares at a loss, further amplifying your losses.

NAB Equity Builder

A NAB Equity Builder loan is very similar to margin lending. The three main differences that set a NAB Equity Builder apart are: 

  • is that it is purely a principal and interest investment loan,
  • there is no margin call, and 
  • You can only select from a small list of LIC, ETFs and managed funds

Out of the two investment loan options, I picked the NAB Equity Builder. Because:

  • It is a principal and interest investment loan, where I believe in debt reduction where interest-only does not have a place in my investment structure.
  • There is no margin call, as I believe we will have another crash like the GFC or last years Covid-19 crash. I believe the market will eventually recover its losses, and I don’t have to worry about an increasing LVR in a crisis.
  • You can only select from a small list of LIC, ETFs and managed funds, as my investment strategy is a core-satellite system, I only invest in ETFs and Managed Funds and small amount of individual stocks.

I have set my investment loan in a way that I am positively geared, but cash negative. I still benefit from the tax deductions associated with the product. This means that my dividends cover the cost of the interest payment, but I still need to pay the remainder off my principal.

The big reason why I went with a NAB Equity Builder loan was the fact of a low-interest rate. This allows my investment to be positively geared. The reason for a lower interest rate compared to a margin loan is because its a principal and interest loan. The standard rate on 25/08/2021 is 5.75%. However, NAB currently has a special introduction rate that is discounted at 2% of the standard rate, to a new special rate of 3.75%. 

This allows me to choose investments in my investment loan to a target dividend yield that is higher than 3.75%. Where we are lucky enough in Australia to easily find good dividend-paying ETFs. 

How I use it

I use a Vanguard Australian Shares Index ETF (ASX: VAS) and the Magellan Global Fund Open Class (ASX: MGOC). This allows me to ensure that my interest part is covered by the securities I hold. While allowing me to have it well diversified in the Australian and global market. I also elected for a 60% LVR, 10-year term loan to ensure my monthly repayments are low, as cash is king!

I capitalised on borrowing during last year’s Covid-19 down term, scooping up shares that believed were at a 30% discount. Since then, the share market has recovered and then some. Now I’m not saying that the share market will always go up. However, since the stock market came into effect, it has averaged around 9% growth every year. Seeing that I am a set and forget type of investor, this works perfectly. I don’t have to worry about a margin call and if the market over 10 years averages 9% every year, hypothetically with a simple compound formula, $10,000 of my investment will be worth $25,500. Before you jump up and down in the comments, I know 9% is not guaranteed and it does not take into effect the loss of dividends due to interest payments. 

Let’s look at a case study: Capt. Jack wants to increase his stock portfolio for dividend earnings to reach Financially Independent in 10 years. Capt. Jack has $60,000 to invest after his last pirate raid. He borrows $140,000 for VAS and MGOC, giving him total assets of $200,000 working for him. He also chooses a 10-year P&I loan, makes a monthly loan repayment of around $1,600 (if interest rates remain low for 10 years), and reinvests all dividends. After 10 years Capt. Jack should have a portfolio of over $500,000 producing over $20,000 in dividends. 

On the contrary, if Capt. Jack just invested $1,600 a month on top of his initial purchase of $60,000. He would be $65,727 poorer than if he invested with the help of a NAB Equity Builder, not including the tax benefits.

Tax Benefits and Gearing Strategy

Borrowing to invest also comes with tax benefits. This is especially true in Australia, where we can offset our losses against our income.

I sit the camp of being positively geared where possible. And as mentioned above, with the NAB Equity Loans low-interest rate. It is easy to find an investment with a high yield to cover the cost of the interest charged.

Just like the tax rules for investment properties, if you borrow money to buy shares, you can claim a tax deduction. Provided it is reasonable to expect that income will be derived from the investment. This part is based on holding the shares privately and not in a company.

The benefit of this strategy is that expenses are covered all by the dividend income. Where I can use franking credits to offset my other taxable income. This allows me to hopefully have my shares increase in value and when I do plan to sell, my capital gains will be only realised later when I am in a lower tax rate: retirement.

So just remember. That Cash is king! For this borrowing strategy to work, you need to get a return greater than the cost of the interest rate that you are paying. Otherwise, you will be falling further behind despise receiving the tax benefits. I don’t want to be relying on purely capital gains growth, I want income as well. I don’t understand why people only chance one or the other, why not do both?

Other NAB Equity Builder tax deductions you may be able to claim.

Travel Expenses – you may be able to claim travel expenses incurred to visit a stockbroker or annual general meeting. This is only true if the whole sole purpose of the travel relates to the investment.

Ongoing Management fees – as an individual you are not charged any fees for holding a NAB Equity Builder loan, so this is not applicable. However, Trust accounts do attract fees.

Publications or Journals – Subscriptions, magazines or other sources of education that is related in the management of your investments are tax deductable. For example, I subscribe to Money Mag, and I claim this as tax and investment education.

Internet access – you need internet access to manage your portfolio. And as such the cost will be deductible to the extend that the internet is used for this. You will need to keep a log bog.

You cannot claim brokerage or stamp duty – the ATO does not allow this as tax deductable unless you are considered a share trader. Most likley you are not a share trader if you own an equity builder.

How do I set up my NAB Equity Builder account?

This block diagram is a simple tax mud map on how my equity builder return was set up. You can see that I am in fact progressing and not falling back. Even though I must pay the bank $116.75 of my own money each month to the bank. I am not “losing it,” look at it as I have pre-purchased shares and I am just paying myself back.

The cost to hold the equity builder is completely paid by the dividends received. This strategy is also offset largely due to my middle-income tax bracket. The one thing I haven’t mentioned is if this was held in my wife’s name, whose tax bracket is less than the franking 30% corporate tax rate.

How do I set up an account?

Head to the Nab Equity Builder website and click on the green Apply Now button. All you must do is fill out an online application form, all the normal questions concerning borrowing money will be asked. Further, a credit check is also conducted.

The whole process took about 2 months to apply, they have a large backlog. You will eventually receive an email from the NAB equity builder team, they may ask you to provide more evidence or reduce your borrowing capacity. they were all friendly and helpful when I was applying.

Once you have received approval, your account will be set up with your available balance. Do note you do not have to use this money; it can just sit there till YOU are ready.

Do your research on your potential investments. This is all found at the approved investment list here. You will notice the far-right column of the security ratio; this is your Max LVR. More on that later.

Once you have decided on what you want to invest in. you will need to fill out the Loan Request form. This is where you outline how much you want to invest, your estimated LVR and how you are going to cover the securities. If you are going to use cash, a direct deposit is taken from the nominated account. If you are using existing shares you will need to transfer investment into the NMS nominees trust account. Cash is the quicker method.

Once the forms have been sent off, they usually process them on that business day. You will be given a statement of confirmation.  This statement will also provide you with repayment details. See below for my example for my last confirmation.

The shares are then held in NMS Nominees Pty Limited (ABN 62 088 233 792). This is a trust wholly owned by NAB. This structure is like a home loan, the bank holds a mortgage over the assets until the loan is paid off. This is the same for the loan, where you are still the beneficial holder with full dividend distribution and voting rights.

You can change to DRP or keep the income to cover the cost of the interest. It’s all up to you. Over the month you will receive a letter from the investment you purchased, with further details on how to manage your account.

Once you’ve paid off your loan the managed investments are completely yours to do whatever you choose. You may hold the investments and continue to enjoy the additional income (and hopefully capital growth), or you may sell your investments

Other Alternatives 

Apart from a margin loan or a NAB Equity Builder, you have two other options. A personal loan (short answer is NO) or a line of credit. But the line of credit can only be accessed if you have a decent amount of equity in your house. A line of credit also comes with the same risk as an Equity Builder concerning defaulting. Where the bank can take from your other assets to recoup any shortfall in the loan amount. I am not familiar with line of credit and It may be worth pursuing in the future.  Further, check out Dave from Strong Money Australia on other ways to leverage, that I don’t.

I hope this has inspired you to do your research on the possibility of including a NAB Equity Builder Loan into your investment strategy for your financial journey. Where you can leverage your way to quicker Financial Independence and keep sailing in the breeze. 


Q: Do I still have to pay CGT on the release of the Loan?

A: No, there is no capital gains events with transfers, only if you sell. Because the nominee is acting as a trustee.

Q: Can I transfer my Funds back into my chess/HIN after my loan?

A: Yes, it’s an easy process your stock brokerage account can manage for you

Q: Do I have to purchases new shares as security? 

A: you can either deposit a set amount for NAB to purchase on your behalf, or you can request a transfer from your HIN/Chess account

Q: Did NAB pay you to write this?

A: No, I just really like this product.

Q: Straight line or Home Loan Method?

A: I did a Straight-Line Method as I believe paying less interest in more important.

Q: Is paying off extra allowed?

A: Yes, there is no “punishment”

Q: Can I still participate in a dividend reinvestment plan?

A: Yes, you still manage your funds directly with the company. Through Computershare and such.

Q. Can I prepay my interest?

A: No

Q: Is it possible to claim the interest charged on money borrowed to purchase shares when there were no dividends paid in that tax year?

A: Yes, if it is reasonable to expect to receive some income in the future. But you would be hard-pressed to find a NAB Equity Builder approved fund that doesn’t pay some sort of income.

Q: What if I default on my loan?

A: Nab may sell off some of your assets to cover the difference. E.g., a default of $500 will see NAB sell $500 worth of assets.

Q: Can I have interest only?

A: LVR below 30%, they allow you to transfer to an interest-only account

Q: Do I still own the shares/funds?

A: Yes, they are held in a trust temporarily and they are still in your name.

Q: Can I have more than 10 years term? 

A: Yes, you need to have a maximum of 60 LVR though.

Q: What’s the minimum purchase amount?

A: $10,000

Q: Can I buy blue stock shares?

A: No must be a fund that is listed here.

Q: The website is saying it’s not open for new investors?

A: Shhhh don’t tell anyone, but this link will work

Still reading: Checkout to see if your Superannuation Underperforming or 7 ways to boost your super right now


  1. Ben

    In Oz, all debt is full recourse. That means that any loan in your name is ultimately callable against your house, regardless of wether or not your house is directly lodged collateral for that specific loan.

    So the risk of losing your house from an equity builder loan vs a direct line of credit loan against your house is actually the same. If, at any time, the loan balance goes negative, and you cannot meet repayments, NAB can and will take whatever of your assets exist to pay the balance.

    So this idea that the equity builder is in some way a lower risk of losing your house as is a home line of credit is actually false (when all other things, such as interest rate and securities purchased with loan, are the same). This is important to grasp.

    1. Thanks for the feedback Ben, and I’m glad you enjoyed my article. I am too, as you can read, a big fan of the Equity Builder loan. It’s such a great way to leverage into the stock market.

      Thanks for the pickup, I have updated my article to reflect. This was an oversight I didn’t think about.

  2. Baz

    if you’re borrowing through an SMSF, this is a limited-recourse loan that provides the lender with ways of recouping their losses if the borrower defaults (usually limited to the sale of specific assets) rather than any assets held by the borrower per se.

  3. ERIC WU

    ‘You cannot claim brokerage or stamp duty – the ATO does not allow this as tax deductable unless you are considered a share trader. Most likley you are not a share trader if you own an equity builder.’

    Just wanted to mention that the Brokerage and Stamp duty is part of the cost base when it comes to CGT calculation.

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