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Borrowing to Invest

Lending Facilities


What is Margin Lending?

Margin lending enables an investor to borrow money, add it to their own savings or equity, and use the total for investment purposes.
When an investor borrows funds using a Margin Lending Facility, they choose their investments from and extensive list of approved managed funds and listed equities.

Why use a Margin Lending Facility?

By adding borrowed funds to your own funds, ie, by “gearing” your investment, the potential for greater returns is increased.
In general terms, a Margin Lending Facility will benefit the investor when the returns from the investment exceed the cost of borrowing. The greater rewards come from capital growth of the investments over a period of time.
In addition, some taxation benefits may be possible whether or not you are paying the highest marginal tax rate.
However, we strongly recommend investors seek professional taxation and financial advice before establishing a Margin Lending Facility.

Understanding the Risks

Just as gearing an investment has the potential to increase returns, it can also increase the losses.
A Margin Lending Facility needs to be supported by the investor’s cash flow during times when the value of the investment falls. If the value falls, you may be required to invest further capital or reduce the loan balance – this is a margin call.
If you receive a margin call you will be advised of the alternatives available to you to restore the loan to security ratio to an acceptable level.
Investments need to be chosen carefully to take into account capital growth and tax effective income. A Margin Lending Facility should be used as a long term investment, rather than for short term speculative gain. It is the time in the market rather than the timing of the market that is important.

Example of a Geared versus Non-Geared Investment

This illustration uses an equity based managed fund for a Regular Gearing Facility.

geared_inv

 

 

 

 

 

 

Non Geared Investment
Invest $1,000 upfront, then $250 per month.
Total personal investment contribution = $31,000 (over 10 years)

Geared Investment
Invest as above, plus borrow $2,000 upfront, and an additional $500 per month
Total personal investment contribution = $31,000 (over 10 years)

Key Features

Two types of Margin Lending Facilities are offered:
Gearing Facility – for the larger, one-off or irregular investment amounts.
Regular Gearing Facility – for those wanting to make regular payments.

These facilities are available to individuals, companies and trustees.

Flexible repayment arrangements at competitive interest rates.

Choice of variable or fixed interest rate terms.

Extensive range of managed funds and share investments to choose from.

Quick settlement of loan applications.

No application fees.

Additional Information

Gearing FacilityRegular Gearing Facility
Credit LimitMinimum $20,000Minimum $20,000
Initial Loan AdvanceMinimum $20,000Minimum $2,000
Initial Equitiy ContributionMinimum $10,000Minimum $1,000
EquityCash and/or existing investments which are on our approved securities list.Cash and/or existing investments which are on our approved securities list.
Additional Loan AdvancesMinimum $2,500Minimum $5,000 per month
Additional Equity ContributorsMinimum $2,500Minimum $250 per month