With the exit of major banks from the SMSF lending space over the last five years, many SMSF property investors are contending with much higher interest rates than necessary.
If you’re looking for an SMSF loan with a more affordable interest rate and better features, our SMSF refinance service might be right for you.
Why are the big banks exiting the SMSF loan space?
The limited recourse nature of a limited recourse borrowing arrangement (LRBA) means that if a borrower defaults on their loan, lenders are only able to recover their funds from the single asset purchased with the SMSF home loan (generally the investment property), and do not have access to the super fund’s other assets. For SMSF trustees, this means their other superannuation assets are protected if they happen to default on their loan — which is a positive for investor’s super balances. However, the big banks viewed this as a component of additional risk. A risk that they were not willing to take on without being compensated through high interest rates.
Most SMSF trustees with an LRBA currently sitting with a big bank will likely notice that their interest rate is higher than 10%, with the lenders unwilling to review their SMSF loan.
How SMSF Loan Experts can help when refinancing SMSF loans
Interest rate reductions
At SMSF Loan Experts, we have access to lenders who specialise in SMSF loans and, as a result, can achieve much lower interest rates.
We have been helping clients refinance their SMSF loans, achieving yearly repayment savings in excess of $10,000, and interest rate reductions of close to 3%. An interest rate reduction of this size has the potential to save the client tens of thousands of dollars over the life of the loan, which certainly helps with customer relationship management.
Offset accounts
We can structure your SMSF loan to include flexible loan features such as an offset account. An offset account can help to significantly reduce the interest expense of the loan, by directly offsetting the loan balance with any cash sitting in the offset account. For example, if your SMSF has $50,000 sitting in an offset for liquidity purposes, the loan balance is reduced by $50,000 for the purposes of interest calculations.
Cash flow management
Cash flow management is a crucial aspect of financial health, and SMSF loan refinancing presents an excellent opportunity to enhance it. By refinancing your SMSF investment loan, you can potentially decrease your monthly loan repayments, freeing up cash flow for other essential expenses or investment opportunities. This improved cash flow can provide greater flexibility in managing your finances, allowing you to allocate funds strategically towards investments, or addressing any unforeseen financial needs.
Can I access equity in my SMSF property during the refinance?
While refinancing an SMSF loan is allowed, according to the Superannuation Industry (Supervision) Act 1993 (SIS Act), it’s important to note that you are restricted from releasing equity or augmenting the initial SMSF loan borrowed amount.
It’s understandable that you might view an SMSF loan refinance as an opportunity to enhance your investment property in order to maximise rental income. However, it’s worth noting that the only exception to the super law, which prohibits effectively borrowing additional funds for property modifications, is when those funds are necessary for minor cosmetic work or upkeep to maintain the property at the market rent standard.
If your SMSF falls under this exception, you can anticipate the lender to oversee the release of funds and request quotes for all planned work.
Refinancing your SMSF loan with SMSF Loan Experts
At SMSF Loan Experts, we specialise in assisting you with finding the optimal SMSF loans and negotiating advantageous terms with lenders. Our expertise can potentially save you money on the loan application fee, interest rates, and ongoing fees, all while ensuring that your new SMSF loan is tailored to your financial objectives and situation.
If you’re looking to refinance an SMSF loan, let our dedicated team simplify the process of refinancing your SMSF loan, allowing you to allocate your time and energy to other crucial areas of your life. Reach out today to learn more, or visit our FAQ page to discover how refinancing your current SMSF loan could substantially boost your Super balance upon retirement.
