NAB Equity Builder: Less crap than it looks

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 I've always relegated NAB EB to the useless pile, 8% interest are you kidding me!

But anyone investing with cash who has a mortgage is effectively investing with a = 6.1% / (100% - 32%) = 9% loan. 

With that thought, NAB EB is actually better than it looks. If you are prepared to invest cash from your offset, consider NAB EB instead, its cheaper.

So who can benefit from NAB EB? What if you have a starter home and thus debt recycling is probably not a good long term strategy? 

Your options become below. 

1. Don't Invest

For many this is the sensible choice, as if you plan to buy a larger home will might need all the money you have. But, if you have a cash surplus, then...

2. Invest Cash from Offset

Invest the cash directly from the offset. You are paying 6% (mortgage rate) after tax interest doing this.

This comes with the advantage that you can easily sell and debt recycle when you buy your long term PPOR.

3. IP Equity

Your future IP (or any IP) you can pull equity to invest. But again this might not be an option if it limits your ability to buy the forever home. 

Expected Rate on a 6.3% mortgage

  1. 32% MTR = 4.28%
  2. 39% MTR = 3.84%
  3. 47% MTR = 2.96%

4. NAB EB

At 8% the after tax cost of NAB EB is

  1. 32% MTR = 5.44%
  2. 39% MTR = 4.88%
  3. 47% MTR = 4.24%
So NAB EB is actually cheaper than (2). And unlike (2) there might be a way that you don't have to sell your entire portfolio to move it over to be debt recycled. This lets you kick the CGT can down the road, hopefully into a 0% MTR year.

5. Future PPOR

Just for comparison, when you finally do get the future PPOR you can pay out the NAB EB (I assume) and thus move the debt onto the PPRO. Then your rate will drop to the following on a 6% mortgage:
  1. 32% MTR = 4.08%
  2. 39% MTR = 3.66%
  3. 47% MTR = 2.82%

Summary

If you are thinking of investing cash from the offset, consider NAB EB.

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