SMSF Loans
Unlock property investment potential with SMSF loans with GoEazy Finance. Secure, compliant, and tailored solutions for expanding your investment portfolio.
A Self-Managed Super Fund (SMSF)
Understanding SMSF Loans: Unlocking Investment Potential
A Self-Managed Super Fund (SMSF) loan is an investment loan that allows an SMSF to use its funds as a deposit to purchase an investment property and borrow the remaining amount needed to complete the purchase. This enables an SMSF to invest in properties it might not otherwise have the funds to buy outright.
Key Features of SMSF Loans
- Property Types: Depending on the lender, an SMSF loan may allow you to purchase residential, commercial, or rural investment properties through your SMSF. Interest-only repayment options are often available.
- Loan to Valuation Ratio (LVR): The maximum LVR for SMSF loans varies based on the type of property being purchased. Some lenders may only lend for certain property types, so it's important to check the specific requirements with your lender.
- Superannuation Law Compliance: SMSF loans must adhere to strict superannuation laws. Typically, a separate trust must be established to hold the property.
Steps to Obtain an SMSF Loan
- Engage a Legal Professional: Before taking out an SMSF loan, you should consult a legal professional experienced in SMSF lending. They will help set up the required structure to ensure the loan complies with superannuation law.
- Loan Application: Once the legal structure is in place, you can engage with your lender to apply for the loan.
Restrictions on SMSF Loans
When considering SMSF loans, it’s important to be aware of certain restrictions that may affect your investment decisions:
- Construction Loans: Most lenders do not offer construction loans for SMSFs. If you intend to renovate a property, the SMSF can use its own funds, but borrowed funds cannot be used for renovations.
- Refinancing: Refinancing existing SMSF loans is only available from a limited number of lenders. It's essential to check with your lender regarding their policies on refinancing.
- Owner-Occupied Properties: Purchasing a property within your SMSF that you or a related party intends to live in (as a home) is not allowed. However, owner-occupied business premises may be acceptable.
- Selling Residential Property: Selling a residential property to your SMSF, especially if you or a related party owns it, is generally not permitted. Commercial properties, however, may be acceptable under certain conditions.
- Liquidity Requirements: Banks often have liquidity requirements when lending to SMSFs. These requirements may vary among lenders, with some being less stringent than others.
Before proceeding with an SMSF loan, it’s crucial to thoroughly understand these restrictions and consult with a financial advisor or legal professional specialising in SMSF lending. They can provide guidance tailored to your specific circumstances and help ensure compliance with superannuation laws and lender requirements