SMSF Loans

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?

• The Big Four banks, AMP, Macquarie Bank, The Big Four banks, St. George, and all previously-issued SMSF loans have all given up on the market. Liberty Financial is one of the lenders that still offers these products.

Is it possible for my SMSF to obtain a loan?

• The amount you can borrow in an SMSF loan will depend on your financial situation as well as your lender and their policies. Some specialty lenders offer SMSF loans from $100,000 ranging up to $4,000,000. You might need to maintain a minimum amount within your SMSF after the property sale.

How much may I take out a loan from my SMSF?

SMSF loans often allow for up to 70% leverage, 30-year periods, and up to five years of interest-only payments. The minimum loan amount is $100,000, with no limit, 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 30% 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?

• Redevelopment and resale property
• The old residence of a friend
• International real estate

SMSF Pros and Cons

Although having your own super has many benefits, SMSFs are not right for everyone. Let’s examine the main advantages and disadvantages of SMSFs so you can determine if it’s right for you.