Looking for an SMSF Loan? We’d love to help!
Whether you are a near-retiree, or someone planning for retirement in advance, we'd love to help you with a loan for your Self Managed Super Fund. We have a dedicated team here in house, ready to help you find the best option for your situation.
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An SMSF loan is a loan taken out by a self-managed super fund to purchase an investment property. The investment returns such as rental income or capital gains are filtered back into the super fund, thus boosting your retirement nest egg.
If you are considering applying for an SMSF loan, here is an ultimate guide to SMSF loans to facilitate your application process.
The amount you can borrow will depend on your circumstances, here are some typical examples:
There are specific laws, restrictions, and criteria that an SMSF must adhere to when borrowing money. Here are some of the rules associated with SMSF borrowing:
Note: You should begin your SMSF loan application at least two weeks before you start searching for a property.
The bank assessment process will require you to provide proof of the self-managed super fund income. The bank will expect you to provide at least two years of income proof; they will then look at your expected rental income to determine whether or not you qualify for the loan. Some lenders will accept a personal guarantee plus income proof from fund members if necessary.
Here are some of the restrictions that exist for SMSF loans:
Note: Seeking professional financial advice before applying for an SMSF loan is advisable.
Most SMSF loan agreements lend funds to the trustee who does not own the property. Some lenders will lend to the trustee of the bare trust. Therefore, you can enjoy lower interest rates, in which case an agreement would have to be made between the SMSF trustee and the trustee of the bare trust.
The bare trust trustee should also be director of a company.
Most major banks do not offer SMSF loans, because this type of loan is relatively new. Therefore, processing the loan application requires more work for the lending bank. Certain lenders will offer SMSF loans, to find the best option for you, seek the advice of an experienced financial advisor who specializes in this type of lending.
The loan is signed over to the trustee of the super fund; the security custodian will act as the mortgagor.
The lender has limited access to assets; therefore if payments are late, the lender can only access one specific asset.
Some, not all lenders ask for a guarantee from all the members of the trust
If you borrow 60% or less of the property value, most lenders will not require personal guarantees, especially if the super fund has a large balance.
Do zero deposit SMSF loans exist? To apply for and be approved for an SMSF loan you need at least 24% of the purchase price of the property to go towards your 20% deposit, stamp duty, and other expenses. If you have funds in an existing super fund, you can transfer these funds to pay your deposit. Therefore, it is not necessary to have a deposit in your own name to purchase a property using an SMSF loan.
Depending on the lender, some might assess the income of the beneficiaries especially if it is a relatively new fund. The loan can often be evaluated by using estimated contributions to the fund; lenders will also check the affordability of the repayments.
Your SMSF cannot purchase a property that is owned by you or any of the fund members. However, it is possible to buy a commercial property that is owned by members of the SMSF. This guideline should be strictly adhered to as significant penalties will be imposed if you do violate this rule.
Some lenders and mortgage brokers specialize in providing loans to SMSF customers. Speaking with a qualified financial expert regarding your SMSF loan is advisable, they will be able to point you in the right direction and guide you through the SMSF loan application process. Ensuring all your documentation is in order and you are aware of all the legal jargon associated with purchasing property using an SMSF loan.
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