One of the key benefits of having your own self-managed super fund (SMSF) is the ability to invest in property inside super (taking advantage of the concessional super fund income tax rate of only 15%), provided you comply with relevant legislation. Other types of super funds (such as retail, industry, company and public sector super funds) can’t invest directly in residential property.
If you are one of the many people making the most of loans to SMSF to buy property under a limited recourse borrowing arrangement (LRBA), you should review your financing every few years. If a better deal is available, you can refinance your SMSF property loan.
The benefits of refinancing an SMSF loan
Better interest rates
The major benefit of refinancing an SMSF loan is to get a lower interest rate. Even a slightly lower interest rate can make a BIG difference.
You may not realise it, but SMSF investment property loan interest rates are higher than those for residential home loans. The lower the rate you can get, the better. Once you get a lower rate, you can either:
- – lower your regular repayments, or
- – keep them the same so you can pay off your SMSF property loan faster.
More appropriate features
If you’re not using an offset account, it could be worth considering refinancing an SMSF loan purely for the benefits of an offset account. The standout benefits of an offset account are:
- – The ability to directly reduce the loan balance for interest calculation purposes (meaning you pay less interest!).
- – You can hold cash for liquidity purposes in a cash account, effectively earning a higher return than a regular savings account (because you’ll reduce your interest expense by more than the amount of interest you would make in a savings account).
Case study: Refinancing existing SMSF loan
Helen has her own self-managed superannuation fund and took out an SMSF home loan from one of the major banks to buy an investment property through her fund five years ago.
With interest rates in Australia currently being at record lows, she wondered if she could get a better deal. She approached us at SMSF Loan Experts for a free, no-obligation chat.
As is often the case, we were able to find her an SMSF loan at an interest rate that was 2% lower than the one on her existing loan. Refinancing her loan to the lower rate saved Helen $10,000 a year in interest repayments in the first year alone, and will save her much more over the term of her loan. And even better, our service cost Helen nothing at all — no upfront, service or ongoing fees!
Helen is continuing to make the same level of repayments after the refinancing, which means her SMSF property investment will be paid off much faster. Paying less interest also means that the value of her SMSF will grow faster too, giving her more funds in her retirement nest egg.
Paul – 5 Star Google Review
I’ve just settled on refinancing my SMSF, and I could not be happier. SMSFs require much more work to refinance, however Michael Maiolo from SMSF Loan Experts guided me through this journey from start to end, making the process a less daunting experience. Michael helped me save over $400 in monthly repayments compared to my previous lender! I highly recommend speaking to the professional team at SMSF Loan Experts to see how they can help you save with your SMSF loans.
Vijay – 5 Star Google Review
Thanks to Carly and Nick from SMSF Loan Experts for providing the best service for our SMSF refinancing.
Refinance SMSF home loan
If you have an SMSF residential or commercial property loan that you took out more than two years ago, you might be paying more interest than you should be. Contact SMSF Home Loan Experts for a free, no-obligation chat to explore your refinancing options and SMSF lending.