loans.com.au has some of the lowest rate SMSF loans in the market and wants to help you refinance your SMSF so you can start saving thousands.
With an easy refinance process, no application or settlement fee, no monthly, annual, or ongoing fees, and a competitive interest rate, get ready to start saving on your current SMSF loan.
Refinance Your SMSF Loan
An SMSF home loan is a loan that trustees of a self-managed super fund (SMSF) use to buy an investment property. Any returns on the investment, whether that be rental income or capital gains, are funneled back into the SMSF to increase your retirement savings.
SMSF home loans are fairly similar to normal home loans, but they are a lot more complex to process and there can be huge fines of over $200,000 if the loan application hasn’t been structured properly or is not compliant.
You can typically only buy an asset through your SMSF using a limited recourse borrowing arrangement (LRBA) which means the lender won’t be able to seize any of your other SMSF assets if you happen to default on the SMSF loan.
Why Refinance An SMSF Home Loan?
The biggest benefit of refinancing an SMSF home loan is the same as refinancing any other type of loan - to get a better interest rate in order to save money on the loan. If your current SMSF loan has a high interest rate, refinancing to an SMSF loan with a lower interest rate could save you thousands.
Other benefits of refinancing include getting an SMSF loan that offers better features or more flexibility, such as the ability to make unlimited extra repayments, or low or no fees.
How To Refinance Your SMSF Loan
To refinance an SMSF you generally have to meet some pretty strict approval requirements that include:
Borrowing up to 80% of the value of the property (so the entire cost to switch or refinance the loan must be no more than this amount).
The property you’re buying with an SMSF home loan must be a standard residential property in a metro location.
You generally need to have between 10-20% of the property value in liquid assets after settlement.
The new loan can’t be more or less than the current loan amount and it has to have a loan term between 15 and 30 years.
The current loan has to be more than one year old with on-time repayments for the last six months.
Documents required for SMSF refinancing
Refinancing an SMSF loan is a more complex process than refinancing a traditional home loan and it requires a lot more documentation. This includes:
SMSF trust deed
Custodian trust deed
Latest super fund statement prior to the establishment of your SMSF
The last two years of audited SMSF annual returns
An accountant’s letter confirming the company trustee is not trading
The last two years' financial reports
The last two years of income tax returns on all related entities
Fund income tax and regulatory return
Costs of refinancing an SMSF loan
Depending on the lender, some of the costs of refinancing can include:
Loan application fee, however, loans.com.au does not charge an application fee.
Settlement fee (loans.com.au also does not charge a settlement fee)
Government fees to register and transfer the property
Ongoing fees. loans.com.au doesn’t charge any monthly, annual, or ongoing fees
Things To Consider When Refinancing Your SMSF Loan
Before refinancing your SMSF loan, there are quite a few things to consider, including:
ATO requirements: The Australian Taxation Office (ATO) states that you can’t increase the amount you’re borrowing against the property when refinancing an SMSF loan. You also can’t refinance to improve the property through renovations but repairs are allowed. There are many other ATO requirements around refinancing SMSF loans so it’s important to seek expert advice.
Terms and conditions: SMSF loans come with many terms and conditions attached so it’s important to read the fine print carefully. These terms and conditions can include the minimum amount of funds required to be held in the SMSF, details about the purchase of the property, and much more.
Repayment terms: Before refinancing your SMSF loan, consider whether you could benefit from switching to a loan with an interest-only repayment period to minimise your monthly repayment amount, or whether it would be worth switching to an SMSF loan with a longer or shorter loan term.
Interest rate, fees, and charges: A big reason why people refinance their SMSF loans is to get a better deal, so make sure to shop around and compare rates offered by a range of lenders. You should also consider whether switching to an SMSF loan with a fixed or variable rate could save you money, and how much you could potentially save in fees by refinancing. What fees currently apply to your SMSF loan? We don’t charge any monthly, annual, or ongoing fees.
Benefits of refinancing versus the cost: Setting up a new SMSF loan can be costly with application, settlement, and legal fees. Our SMSF loan has no application or settlement fees.
The time it will take to refinance: Refinancing an SMSF loan can take longer than refinancing a traditional home loan because there’s a lot more paperwork involved. Ask yourself if the benefits of refinancing your SMSF loan will outweigh the time it will take.
Refinancing an SMSF loan takes a lot longer than refinancing a traditional loan and can take between four and six weeks from application to settlement. This is because SMSF lending is a highly specialised area of lending which requires a lot more documentation than a regular home loan.
According to the ATO, a trustee can use a limited recourse borrowing arrangement (LRBA) to fund the purchase of a single asset (or a collection of identical assets that have the same market value) to be held in a separate trust. Any investment returns that are earned from the asset then have to go to the SMSF trustee. If the loan defaults, the lender's rights are limited to the asset held in the separate trust, which means there is no recourse to the other assets held in the SMSF.
If you purchase residential property through your SMSF while you are working, you can only rent it out as an investment property, provided it is not rented out to any member of your SMSF fund or a relative of a member of the fund. This situation changes when you retire only if the property is transferred to you, meaning it is no longer owned by your SMSF.