WHAT IS SMSF?
A self-managed superannuation fund is a type of trust.
WHEN IS AN SMSF ALLOWED TO BORROW MONEY?
- The asset is the asset that SMSF can acquire.
- The asset is held by security trust for SMSF.
- The SMSF acquires a beneficial interest in the asset from the outset.
- The SMSF has the right to acquire legal title from the security trustee upon making all loan repayments.
- The lender must only have limited recourse against one particular asset. This means that in the event of a loan default, the lender must not be able to claim any other assets of the fund.
- Each borrowing arrangement can only be for a “single acquirable asset”. In the case of strata title or subdivisions, each title is considered a separate asset.
HOW MUCH CAN I BORROW?
- Standard SMSF loans allow you to borrow up to 80%
- Commercial property loans allow you to borrow up to 75%
- In case of bad credit history, the loan may be limited to80% of residential property value, or 70% of commercial property value.
HOW DO LENDERS ASSESS INCOME?
- Have sufficient income proof to support the loan.
- Most lenders look at the most recent 2 years tax returns.
- Having income evidence of beneficiaries of the trust increases the chance of getting the loan approved.
SOME RESTRICTIONS:
- - Construction loans are not available.
- - Refinance only available from few lenders.
- Getting SMSF loan for a property you are intended to stay in is not allowed.
- Selling your own or related party residential to your SMSF is not allowed.
- Many lenders have liquidity requirement.
WHEN SHOULD I APPLY FOR THE LOAN?
At least two weeks before looking for a property.
CAN I GET SMSF LOAN WITH NO DEPOSIT?
You need at least 20% of property value as deposit. You can use existing superannuation as a deposit if you have $100,000 in managed super fund.
DO LENDERS ACCEPT MY OWN SUPER CONTRIBUTION?
No, if you are close to retirement age.
If you do not have personal income, then lenders may shorten your loan term to match your rental income to loan repayment.