SMSF Loans

Are you looking for an SMSF loan at a competitive rate? Home Loan Experts can help you with:

• SMSF For Residential Investment
• SMSF For Commercial Loans
• Refinancing Your SMSF

Our team understands the intricacies of SMSF lending policies. We’ll help you identify lenders that:

• Approve applications nearing retirement with a solid exit strategy.
• Offer flexibility with liquidity requirements or even waive them.
• Consider all income sources, including rental income, SMSF contributions, and member guarantees, to improve serviceability.

Why Choose Home Loan Experts For Your SMSF Loan?

Few mortgage brokers or bank managers understand Self-Managed Super Funds (SMSF), and even fewer are experts in lending to them.

This is why you need an expert on your side.

At Home Loan Experts, our mortgage brokers specialise in SMSF lending.

• We are regularly updated with SMSF loan products and features, so we can compare options and find you the most suitable terms and interest rates.
• We know which lenders have offset accounts for SMSF home loans. With an offset, you can pay off the loan much quicker and also save a lot of money in interest.
• We simplify the application process by assisting with paperwork and ensuring everything is submitted correctly and on time.
• We understand and help you navigate the specific tax benefits and implications associated with SMSF loans, ensuring compliance with ATO regulations.

How Does An SMSF Loan Work?

An SMSF loan allows you to use your Self-Managed Super Fund (SMSF) to borrow money to purchase residential investment and commercial properties.

• Establish The SMSF: The first step is to set up an SMSF, which involves creating a trust deed that outlines the fund’s rules and governance. This structure allows you to borrow money from your SMSF to purchase properties.
• Get Pre-Approved: Once that’s established, speak to an SMSF loan expert or a lender to get pre-approved to determine how much you can borrow so you have a clearer budget to start your property investment. The lender will assess you on factors like the expected rental income, compliance with regulatory requirements and the SMSF’s financial health.
• Set Up Bare Trust: Once you get pre-approval, a bare trust must be established to hold the property on behalf of the SMSF. The trustee of this bare trust must be independent of the SMSF trustee, often taking the form of a corporate trustee. This structure is crucial, as it allows for Limited Recourse Borrowing Arrangements (LRBAs), meaning that in case of default, the lender can claim only the property purchased with the loan.
• Finalise Purchase Contract: You can now negotiate and finalise a contract for property purchase. The contract must be in the name of the bare trustee, rather than directly under the SMSF.
• Get Formal Approval: After the contract signing, the lender will do a property valuation to confirm its market value and ensure it meets lending criteria. Once completed and all documents required are in order, you will get formal approval.
• Settlement: You will now receive specific mortgage documents that outline the terms of borrowing. Once you’ve signed and returned the documents, the settlement process begins, which involves transferring ownership of the property to the bare trust. The SMSF pays for the deposit and associated costs from its bank account.

After settlement, the SMSF is responsible for managing ongoing expenses related to the property, such as mortgage repayments, maintenance costs, and insurance. Rental income generated from the property flows back into the SMSF, contributing to retirement savings growth. Once the loan is fully repaid, the legal title can be transferred from the bare trust to the SMSF or remain under the bare trust structure based on strategic decisions the trustees make.

How Much Can I Borrow?

• Standard SMSF Investment Loans: Up to 90% of the property value for residential property.
• Commercial property: Up to 80% of the property value for non-specialised securities.
• Bad credit: Up to 80% of a residential property or 75% of a commercial property with an SMSF bad credit loan.

How Will My Borrowing Capacity Be Assessed?

Your borrowing capacity will be assessed based on your self-managed superannuation fund (SMSF) contributions and its ability to support the loan. Lenders evaluate factors such as the contributions to the SMSF you and your employer make, and the proposed rental income from the investment property. The good news is that you don’t need an established SMSF to apply. Additionally, some lenders allow SMSF members or beneficiaries to use their personal income to support the loan, provided they give a personal guarantee.

What Is The Eligibility Criteria?

To qualify for an SMSF loan, the fund must be properly established, which includes having a compliant trust deed and appointing trustees who adhere to the regulations of the Australian Taxation Office (ATO) and the Australian Securities and Investments Commission (ASIC). The investment strategy must align with the fund’s objectives to ensure compliance.

You also need to have:

• A minimum balance of $150,000 to demonstrate financial stability.
• A liquidity buffer, typically around 10% of the property’s value, to ensure that the SMSF can cover ongoing expenses and loan repayments, even after purchasing the property.
• Sufficient rental income to cover loan repayments and other expenses.
• A consistent and steady contribution history to the SMSF from its members.
• Good credit history of trustees, reflecting reliability in managing debt.

What Are The Documents Required

• Copy of certified SMSF Trust Deed (including any deeds of variation) and SMSF Property (Bare) Trust Deed, signed and dated.
• Funds to complete in SMSF fund statement or cash management account (If not established, a letter from adviser confirming the rollover amount).
• For PAYG: Two most Recent Payslips, evidencing super contributions.
• For Self-Employed: Two years’ Personal Tax Returns and NOA. Company financials and Business Tax returns might also be required. (OR) Last two years SMSF cash management account statements or existing superannuation statements to be rolled over, evidencing contributions, cash and investments.
• Evidence of rental of the proposed property (appraisal), and rental statements for any other properties held by the fund not taken as security (if applicable)
• An exit strategy in some cases.
• If SMSF trust is established, then the lender might require two years of audited financial statements, tax returns, and SMSF Auditor reports (if applicable).