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Leverage into Navra fund?

Discussion in 'Managed Funds & Index Funds' started by Dave, 24th Aug, 2005.

  1. Dave

    Dave Well-Known Member

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    Hi all,

    Has anyone here used margin lending to buy units in the navra fund? If so, and if its not too rude to ask, how much LVR did you use and which lender did u use?

    Also, does anyone know if its possible to apply for margin funds into an existing navra fund account? Or to have margin funds added monthly as per the "savings plan" available?

    Thanks,

    Dave
     
  2. perky

    perky Well-Known Member

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    I used BT online (and as I am a westpac customer got an extra .15% off) , they also give Navra customers an extra .1% off I think as a negotiated deal that has been done for Navra clients.
    I LVR'd up to 67% - max is 70% and nearly had a margin call in April as I plonked the funds in just before the market went backwards some 9% at that time - good timing eh !!
    Since then I am almost back where I began as the market has risen - and have had two quarterly dividends which were quite nice.
    Navra recommends 50% leverage - and after my episode I can see why - however I do tend to push things a bit close to the edge at times :D :D
     
  3. Simon Hampel

    Simon Hampel Co-founder Staff Member

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    Leveraged Equities also offer up to 70% LVR against Navra.

    You can have your existing fund units transferred over to your margin lender and use that as collateral for leveraging - this is what I did, transferred my retail units to my margin loan account, then leveraging that plus extra cash I put in, got whole sale units too - without needing to sell my retail units.

    I am to maintain my portfolio at between 50% and 55% LVR to give myself some headroom in case of market drops.
     
  4. gazza

    gazza Well-Known Member

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    I used Colonial Margin Lending. A bit like Perky, I am reasnably aggressive with an LVR of 60% (max is 67%) although there is a further buffer of around 10% before a margin call is made. Current rate is 7.8%.
     
  5. perky

    perky Well-Known Member

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    Forgot to answer this one.
    Yes you can margin loan using an existing account - and yes you can add monthly like a savings plan.
    It mentions that $500 must be transferred in or out at a time as a minimum - but I think they will allow a monthly amount to be put in (say $100) - Steve would be best to answer this.
    Currently the interest rate I am paying is 7.95% (3 months in advance) - after each quarterly distribution- I found that easiest way...
     
  6. Glebe

    Glebe Well-Known Member

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    Yes
    55%, now 51% and dropping with each distribution. Used Leveraged Equities. Excellent service. I have my own account manager with his direct number and his email address rather than a call centre. Interest rate was 7.9% or so (can't remember). I prepaid it on the 30th of June.
     
  7. Here_To_Learn

    Here_To_Learn Well-Known Member

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    Perky - I also use BT online and am a Westpac customer. Can I ask you ... how did you go about obtaining the .15% off ?
     
  8. perky

    perky Well-Known Member

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    Just mention it to BT , they may require a statement or some other proof from Westpac (I think that you have to be on their professional package with the the .7% off too) - show Michelle/Greg/Mark or whoever your Navra adviser is and they will pass on the proof to BT.
     
  9. Dave

    Dave Well-Known Member

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    Thanks for your excellent responses.

    I have already received some brochures in the post from LE, and they seem pretty good, might run with them.

    Perky: Does the timing work ok on receiving your distribution -> 3 month payment being due?

    Glebe: Did you request the non-callcentre approach or is that what they give everybody? :p

    Cheers

    Dave
     
  10. Mark Laszczuk

    Mark Laszczuk Well-Known Member

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    Dave,

    If you're a Navra client, talk to your adviser - they will be able to help you with your application.

    Mark
     
  11. perky

    perky Well-Known Member

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    Its does for me - reason is this.
    The margin loan started at the end of the month - and the dividend usually arrives around the 14th or 15th of each month - so the money is there in my account ready for BT to take out their auto debit. I started the 3 monthly one on July 28th.
    If the margin loan starts say the 20th of each month (or you make BT withdraw the funds on that date) it would time perfectly. All you the have to do is wait till late September, give BT a call and ask them to start taking it out on (say) the 20th October every 3 months from then on.
     
  12. Mark

    Mark Member

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    How much LVR for a margin loan?

    The level to which you leverage is dependent upon your personal circumstances and risk profile. Generally Steve, Greg and I gear clients to 50% initially although the lenders are happy up to 70%. At this reduced level you have sufficient "buffer" for a possible drop in unit prices plus allow for the loan interest to be capitalised rather than be paid monthly. Why would you do that you ask?
    Well possibly you would rather invest the funds distributions in other non deductible debt or to cover other lifestyle needs for the meantime while allowing the margin loan, which is normally deductible, to climb. Without going into specific financial advice its about effective debt management.

    If you have an existing Navra Fund units you would need to transfer them to the lender who would then establish the loan against them. Very easy process.

    Yes you can easily set up a savings account and have the lender increase their monthly loan amount. By the way the minimum interest charged by the lenders is for an amount of $20,000.
     
  13. Mark Laszczuk

    Mark Laszczuk Well-Known Member

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    Just to add to Mark's post, if using Leveraged Equities and you want to start small and use a regular savings plan, you can use LE's Wealthbuilder. Note that the minimum loan amount on this is $2,000.

    So if you wanted to leverage to 50% you'd need to put in $2,000 of your own money along with the margin loan. Also, the $20,000 minimum loan requirement does not apply to Wealthbuilder.
     
  14. Dave

    Dave Well-Known Member

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    Hi Mark's :D

    Thanks for responding.

    Im possibly looking at drawing around 40k equity out of property and then 50 - 60% gearing that into shares and / or funds. I'd probably have the distributions paid out to help fund the property shortfall. I dont have any non-deductible debts.

    Cheers

    Dave
     
  15. Glebe

    Glebe Well-Known Member

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    I didn't ask so I assume everyone.
     
  16. Simon Hampel

    Simon Hampel Co-founder Staff Member

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    I think it's standard for LE
     
  17. OLI

    OLI Well-Known Member

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    Is this when you would use an off-market transfer form and pay stamp duty on the transfer?
     
  18. Simon Hampel

    Simon Hampel Co-founder Staff Member

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    No stamp duty required ... just ask your margin lender about transferring existing securities or funds to them - they will give you a form to do so. Was very easy.
     
  19. Andrew

    Andrew Active Member

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    Hold on a minute there, what's the point of paying down non-deductable debt with the
    dividends and letting the interest capitalise. Capitalised interest is not deductable, or
    are we in some strange alternate universe where I have no idea what I'm talking about.

    How does swapping one form of non-deductable debt for a (potentially higher interest
    rate) non-deductable debt help?

    andy
     
  20. Mark Laszczuk

    Mark Laszczuk Well-Known Member

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    Andy,

    The capitalised interest on your margin loan has a much smaller value than the non-deductible debt on your home loan. I'd rather use the money that I would be using to pay down deductible interest (on my margin loan) to pay off my non-deductible debt. Yes, you end up with a higher interest bill on your margin loan, but in my mind capitalising that interest is preferable.

    Look at it this way: say you have a margin loan of 100K at 8%. Would you rather use that 8K to pay interest that is deductible or use that 8K to pay down the loan on your PPOR? Some people prefer one way, others prefer it another. Horses for courses and such.

    Mark