Why are SMSF loans more expensive than standard residential loans?

We get asked this question a lot – and while at first it may seem to be because the banks, the reality in this instance is that the blame is mostly on the regulator. What is going to define the cost of a loan to a lender is the amount of capital they will have to hold to lend you that money. Broadly speaking the regulator is going to determine how much the lender has to keep on their balance sheet for each dollar lent. So for a self managed super fund loan the regulator is going to require the lender to hold more money on their balance sheet than they would for a standard residential loan.