Looking at accessing an SMSF loan for an SMSF investment property purchase? Your SMSF may be able to borrow up to 90% of the property’s value!
This high LVR SMSF loan is a game-changer for many SMSF investors looking to purchase property inside their self-managed super fund.
As leading SMSF Loan Experts, we have been offered this exclusive opportunity for our clients.
This is a major development for SMSF investors, and we are so excited to be able to offer the opportunity to you.
Before you enter into a home loan, investment loan or SMSF loan, the property you’re looking at purchasing must be valued. Your loan-to-value ratio (LVR) indicates what percentage of the property’s value you need to borrow money for. Essentially, the higher your LVR, the more of the property is mortgaged. The bigger your deposit, the lower your loan-to-value ratio (in most instances).
No complicated formulas or online LVR calculators are required when getting an estimated LVR. Simply divide the total loan amount by the property’s value.
Property value of $1,200,000
Mortgage of $960,000
Therefore, in the above scenario, the LVR is 80% (80% of the property’s value is mortgaged). To understand if the bank valuation is accurate, it’s important to always ensure that you have a general idea of your property’s estimated market value in the current market. Keep in mind the property value may be different to the purchase price.
Depending on your financial situation and the current property market, your LVR may not be totally in your control.
Many borrowers often aim to have a lower LVR as it can indicate a higher borrowing power and potentially attract lower interest rates. A low LVR may also mean you don’t need to pay lender’s mortgage insurance (LMI). However, high LVR loans are common in today’s market and may provide you access to a property market that would otherwise be out of reach.
Lenders’ mortgage insurance, or LMI, is one of the upfront costs that may need to be paid when taking out home loans and investment loans during the loan application process. If the lender-assessed value of the property results in an LVR that is over their threshold, they may deem the loan to be higher risk and request lenders mortgage insurance to be paid.
LMI protects the lender (not the borrower) in the instance that the borrower defaults on the home loan and isn’t able to repay their debt, and the current market value of the property has dropped since the bank’s property valuation at the loan application stage.