Turning a ‘No’ into a ‘Yes’ – An SMSF Loan Comeback Story

Background

When Mark Kelly and Anna Kelly, both experienced registered nurses, set out to purchase an investment property using their Self-Managed Super Fund (SMSF), they thought they had all their ducks in a row. However, their employment history, recent structural changes to their business, and the complexity of SMSF lending proved otherwise.

The couple were registered nurses operating as sole traders for over two years. They recently changed their business structure and are now directors of a company. They had been receiving regular employer super contributions and voluntary top-ups through their company.

They were confident that their combined SMSF contributions, along with a projected rental income from the new property would suffice for a loan.

But they quickly faced major setbacks. Here’s the story of how Home Loan Experts broker Prabesh helped them overcome these challenges.

A Bump in the Road

Mark and Anna had everything set up. At first glance, their application looked strong. Both are registered nurses employed in the healthcare sector, with strong PAYG histories. In addition to their jobs, they were self-employed for over two years, each operating as a sole trader, and recently transitioned to a company structure.

They made no voluntary super contributions during their self-employment period, however, which presented a challenge when applying for an SMSF loan.

Although both Mark and Anna had since resumed contributions ($9,480.90 and $7,950.28 annually via their employers, plus $12,000 each in voluntary contributions), lenders flagged the prior absence of voluntary contributions as a concern for SMSF servicing stability.

The lack of super contributions during the client’s self-employed years would typically disqualify an SMSF application under most lender policies. And although the lender issued pre-approval, the deal was later declined after a full credit assessment revealed:

• A $16,000 net loss in interim financials.

• The loss was not flagged at the pre-approval stage, which created unexpected friction close to the finance deadline.

• The lender did not add back wages for serviceability, even though it is a standard and logical approach in many SMSF assessments.

The Resolution

When Mark and Anna approached Prabesh Thapa from Home Loan Experts, he had a complicated problem in front of him: he had to get an SMSF loan approved for borrowers who had not made a contribution in two years. And while he successfully secured a lender’s pre-approval, the application was unexpectedly rejected at the final stage.

So, Prabesh took a more proactive approach. Before applying again, he created a 3- to 4-month financial plan with the clients to:

• Help set up their SMSF

• Begin company-based employer contributions

• Position them for a successful loan application

When the interim loss triggered the decline, Prabesh worked closely with the client’s accountant to:

• Provide updated financials

• Submit a comprehensive explanation letter contextualising the loss

• Argue for the add-back of wages as a reasonable and common practice

Despite the internal credit assessor recommending a decline, Prabesh escalated the case to the lender’s BDM. The BDM advised that approval would be granted if the funder agreed to the case. Fortunately, the funder reviewed the updated documents, understood the full context, and overturned the initial decision, issuing formal approval just in time for settlement.

With proactive risk identification, and timeline management under pressure, Prabesh ensured Mark and Anna didn’t lose their property.

When things go wrong in the lending process, as they sometimes do, it’s brokers like Prabesh who make the difference between a failed application and a successful outcome.

Want To Leverage SMSF For A Loan?

You can get an SMSF loan even without making a contribution upfront. At Home Loan Experts, our mortgage brokers can create a tailored 3- to 4-month plan to guide you toward loan approval.

Just like Prabesh supported Mark and Anna in securing an SMSF loan for their investment property, our team is ready to help you, too.

Give us a call on 1300 889 743 or fill out our free online assessment form to get started.