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As with most loans you are charged interest on the drawn loan amount.
You can select either a variable or fixed interest rate:
A variable rate loan acts like a line of credit. You can draw down when you need it, or repay part or all of the loan if you sell securities or receive dividends. The interest rate charged on your loan may change depending upon market movements.
A fixed rate loan could give you greater peace of mind because your interest payments are 'locked-in' and you don’t need to worry about interest rate rises for the term of the loan. The interest rate is usually less than a variable loan, and as an added benefit, you may be able to claim all of the interest expense as a deduction in the current tax year.
ANZ offers a wide range of fixed loan terms, from 3 months to 5 years. You can choose to:
- Prepay interest in advance, or
- Pay the interest monthly in arrears
It is important to note that prepaid interest is not refundable and break fees may apply if the loan is paid out while in a fixed rate period.
Leveraging a portfolio is fast becoming a popular wealth creation strategy. However, you should be aware that while leveraging into investments increases the potential return on investments, it is important to recognise that it can also multiply the effects of falls in share market values. We therefore strongly advise you talk to your financial planner and/or stockbroker and ensure you understand the risks, the specific tax implications, as well as the legal and financial ramifications of a margin lending facility.
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