The Self-Managed Super Fund (SMSF) Loan is intended to provide loans to trustees of Australian Self-Managed Super Funds (SMSFs) that are licensed and regulated and desire to purchase a home.
How does a SMSF loan work?
– A self-managed super fund (SMSF) trustee takes out a loan from a third-party lender under a limited recourse borrowing arrangement (LRBA). The trustee then invests those funds in a single asset (or a group of identical assets with the same market value) that will be kept in a separate trust.
Who lends SMSF loans?
– Certain specialist SMSF lenders still lend to an SMSF under specific guidelines in specific circumstances.
Is it possible for my SMSF to obtain a loan?
– Your financial status, your lender, and their policies will all have an impact on the maximum amount you can borrow with an SMSF loan. SMSF loans starting at $100,000 and going up to $4,000,000 are provided by certain speciality lenders.. The serviceability of the loan generally depends on the asset position of the fund, the income of the fund, the contributions into the fund as well as income from proposed investments.
How much may I take out a loan from my SMSF?
Loans from SMSFs frequently provide up to 80% leverage, 30-year periods, and up to five years of interest-only payments.The minimum loan amount is $100,000, with up to $4m, and is contingent on lender approval of the property and the fund’s borrowing ability.
What do lenders consider before making a loan to an SMSF?
• Deposit: A deposit of at least 20% -40% of the property’s value is normally required for SMSF borrowing.
• Rental income is taken into account when determining the borrower’s ability to pay back the loan.
• Contribution patterns: The frequency and consistency with which members contribute to the fund will be utilized as a gauge of the borrower’s capacity to meet repayment commitments.
• For the fund to be considered a suitable borrower, direct property investing and borrowing must be approved by the trust deed and included in the SMSF investment strategy.
• SMSF structure: The fund’s structure must be approved by the relevant authorities, such as the Australian Taxation Office (ATO) and the Australian Securities and Investment Commission
What kinds of properties cannot be funded with an SMSF?
– Property Development
– Related property transactions
– Construction finance
SMSF Pros and Cons
Although having your own super has many benefits, SMSFs may not be right for everyone. Let’s examine the main advantages and disadvantages of SMSFs so you can determine if it’s right for you.
PROS
The way your retirement funds are invested is entirely up to you.
Can make direct residential property investments.
Can put money into things like art, stamps, and gold.
Monies can pooled from family and invested into assets of value.
CONS
An SMSF must have a balance of $200,000 or more to be cost effective.
SMSFs are costly to set up and maintain.
Managing an SMSF might take a lot of time.
Heavy fines apply for non-compliance with the sis act.
What are your fees to organise a loan for the SMSF?
SMSF loans are complex and time consuming and given that the loan value and property purchased are low value investments, as brokers we may not be able to cover our costs in some instances and we’d hence sometimes charge a service fee to organise a loan. This service fee would be payable by your SMSF and in an unlikely event the loan is not approved, we refund the service fee paid.