Frequently Asked Questions

These are some of the questions we're commonly ask by new clients.
Have a question that's not answered here?
Make sure get the correct answers - Send us a message or speak to an SMSF expert 1300 888 888.

Can a SMSF borrow money?

Yes, but only for the purpose of acquiring an investment asset and through a limited recourse borrowing arrangement (LRBA).

What’s a Limited Recourse Borrowing Arrangement (LRBA)?

Your SMSF can buy real estate by borrowing money through what’s called a limited recourse borrowing arrangement or LRBA. The trustee then uses those funds to purchase a single asset (or collection of identical assets that have the same market value) to be held in a separate trust.

Any investment returns earned from the asset go to the SMSF trustee. Should the loan default, the lender’s rights are limited to the asset held in the separate trust, safeguarding the other assets held in the SMSF.

Unfortunately, many lenders now require a personal guarantee from the trustees. So while the assets and funds in the SMSF are protected, the lender can gain access to the trustees’ personal assets.

Can an SMSF borrow to build?

No. It wouldn’t be compliant with the ATO borrowing rules and there are no lenders offering progress payment options for SMSF loans.

Can a SMSF use equity in a property already owned as a deposit to purchase the next property?

Unfortunately not. The only way to access and use the equity in an existing property would be to sell it.

Why are SMSF loans more expensive?

Under current legislation, lenders are required to hold more capital for SMSF loans than they do for standard residential loans. These loans are more costly to the lender, who in turn passes the costs on to the SMSF.

How much can my SMSF borrow?

80% for residential loans and 75% for commercial loans.

What is a liquidity requirement?

Some lenders require that not all of the liquid asset (cash or shares) in the SMSF be used to purchase a property and impose a minimum requirement. For example, they may require the SMSF can still show 10% of the property value in either shares or cash after the settlement of the property.

 

Why do SMSF loan take longer to settle?

Delays often relate to the time it takes to legally assess the two trust deeds, but lenders continue to improve settlement timeframes.

How many lenders offer loans to SMSFs?

While some of the major banks have a limited interest in SMSF lending, there is a broad panel of reputable lenders who work with SMSFs. SMSF Loan Experts currently deal with 17 SMSF lenders.

Can an SMSF get a pre-approval?

Absolutely! We can even arrange for one of our lenders to give you an SMSF loan pre-approval before your SMSF has been setup.

What is a personal guarantee?

SMSF loans are called LRBAs (Limited Recourse Borrowing Arrangements). LRBAs are No Recourse loans, which means the lender has no access to other assets owned by the SMSF in the event of a default. To get around this, banks require the trustee(s) to personally guarantee the LRBA.

Can SMSFs get interest only loans?

Yes, for up to 5 years.

Can SMSFs get fixed rate loans?

Yes, for up to 5 years.

Can you assist with standard lending?

Absolutely. We specialise in SMSF loans, but continue to assist many clients across all forms of lending:

  • Refinance loans
  • Home purchase loans
  • Construction loans
  • Debts consolidation loans
  • Personal loans
  • Low doc loans
  • Bad credit loans

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Make sure you get the right SMSF lending advice. Send us a message
or call SMSF Loan Experts on
1300 781 680.