Latest tips and helpful insights to help you manage your SMSF loans better.
Lender | |||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Variable | More details | ||||||||||||
FEATURED | SMSF 70
| ||||||||||||
FEATURED SMSF 70
| |||||||||||||
Variable | More details | ||||||||||||
SMSF 70 (Refinance Special) | |||||||||||||
Variable | More details | ||||||||||||
SMSF Residential | |||||||||||||
Variable | More details | ||||||||||||
SMSF 80
| |||||||||||||
SMSF 80
| |||||||||||||
Variable | More details | ||||||||||||
Liberty Residential SMSF (LVR < 80%) | |||||||||||||
Variable | More details | ||||||||||||
SMSF Loan (Principal and Interest) (LVR < 80%) | |||||||||||||
Variable | More details | ||||||||||||
Ocean SMSF 90 P&I ($50k - $1.5m) | |||||||||||||
Fixed | More details | ||||||||||||
SMSF 80 Fixed 5 Years (Refinance) |
Base criteria of: a $400,000 loan amount, variable, fixed, principal and interest (P&I) home loans with an LVR (loan-to-value) ratio of at least 80%. However, the ‘Compare Home Loans’ table allows for calculations to be made on variables as selected and input by the user. Some products will be marked as promoted, featured or sponsored and may appear prominently in the tables regardless of their attributes. All products will list the LVR with the product and rate which are clearly published on the product provider’s website. Monthly repayments, once the base criteria are altered by the user, will be based on the selected products’ advertised rates and determined by the loan amount, repayment type, loan term and LVR as input by the user/you. *The Comparison rate is based on a $150,000 loan over 25 years. Warning: this comparison rate is true only for this example and may not include all fees and charges. Different terms, fees or other loan amounts might result in a different comparison rate. Rates correct as of December 4, 2023. View disclaimer.
It is possible to get a loan to buy a property through your SMSF, but it’s a highly specialised and complex topic and strict rules apply.
Australian residents who currently have an SMSF, or are in the process of establishing an SMSF, can take out an SMSF loan to purchase or refinance a residential or commercial investment property.
All SMSF loans need to be taken out through a limited recourse borrowing arrangement (LRBA), which means that in order to limit the recourse of the lender, a separate trust and trustee have to be set up to minimise the risk to other assets in the fund.
In more simple terms, if the SMSF is unable to continue making repayments on the loan and falls into arrears, the lender will try and recover its losses by seizing the assets. Because the property is in a separate trust to the SMSF, the lender can’t pursue the assets in the SMSF which means the assets are protected from the risk of being repossessed by the lender.
There are a few things you need to consider before entering into an LRBA. These include whether the asset you’re using it to purchase passes the sole purpose test, if the loan can be sold to another party, and whether or not the SMSF can cope with an interest rate rise.
As well as using your SMSF to purchase an investment property, you can also use borrowed cash from an LRBA to pay for maintenance and repairs to the property that is part of the SMSF, however, you cannot use these funds to make improvements/additions to the property, such as adding a granny flat or an extension.
The actual process of buying a property through an LRBA isn’t too dissimilar to a regular property purchase, however, the difficulty lies in processing the application. If the loan application isn’t properly structured or compliant, there can be hefty fines of over $200,000 for trustees. This is why it’s strongly recommended to seek out the expert help of an accountant or mortgage broker.
This is generally how the application process works when purchasing an investment property through an LRBA:
It’s extremely important to seek out independent legal and financial advice about your SMSF borrowing money to purchase an investment property. Because SMSF loans are a very niche and complex topic, it’s important to make sure you understand the legislation around what types of properties you’re allowed to purchase, and what restrictions there are on the investment property. For example, if you’re buying a residential property as an investment, you’re not allowed to live in the property.
There aren’t many lenders who offer SMSF loans in Australia anymore due to their complexity and small profit margins. At the time of writing, these lenders offer SMSF loans: