SMSF LENDING: WHICH BANKS HAVE LOANS FOR SMSF TRUSTS?
Which banks give loans to SMSF?
As SMSF Loan Experts, we walk you through which banks will lend money to self-managed super funds for commercial and residential property purchases, and some tips and tricks to be mindful of when borrowing to invest in your super.
Borrowing within a self-managed super fund (SMSF) perches itself higher on the complexity ladder than a run-of-the-mill mortgage on your family home. Overall, the process is fairly similar — your self-managed super fund gets a loan to purchase either residential or commercial investment property. However, when you seek out finance for an SMSF, it needs to be done under a Limited Recourse Borrowing Arrangement (LRBA).
LRBAs are a special structure that enables SMSFs to borrow money for the purpose of investment and therefore are the only avenue in which you can borrow within your fund.
SMSF lending hasn’t been offered by Australia’s ‘Big 4′ banks since 2018 — so you won’t see things like Commonwealth Bank (CBA), NAB SMSF loans, or even Maquarie SMSF loans. Now, there are only a select few second-tier lenders who continue to offer SMSF loans. Your choice of lender is even further narrowed down by whether you’re looking to borrow for commercial or residential purposes. Some of the banks that give loans to SMSF clients include (but are not limited to):
- Bank of Queensland
- Switzer Home Loan
- La Trobe Financial
- Liberty Financial
- Mortgage House
- Reduce Home Loans
- Granite Home Loans
- Mortgage Mart
- Think Tank
- Firstmac
- Yard
- Better Mortgage Management
- WLTH
Thankfully, at SMSF Loan Experts, our name says it all; we are experts in SMSF loans and can assist you throughout the entire process to ensure that your loan structure is the best set up for your needs and strategy.
Depending on your needs, there are lots of different factors that can be played around with. The interest rate is one example of this. There are pros and cons to choosing a variable rate or a fixed rate. We help you decide on the right loan amount, features, and structure, including an offset account to reduce your interest expense and manage liquidity needs. We take you through everything you need to know so your loan amount matches your investment strategy and cash flow needs perfectly.
Due to being a specialised form of lending, mainstream banks take a conservative approach and typically dislike the perceived risk of self-managed super fund lending, such as:
- – Being harder to recover their money if the SMSF defaults on the loan as LRBAs are ‘limited recourse’, meaning the lender is unable to go after an SMSFs other assets to recoup any lost funds.
- – How long it takes to sell commercial property compared to traditional residential mortgages.
- – The intricate web of legislation that is woven around limited recourse borrowing arrangements.
With potential fines to the SMSF trustee of up to $200,000 for a non-compliant lending structure, it’s essential to find the right finance expert for guidance on the best SMSF loan for your needs.
SMSF Services
Whether you’re looking to refinance an existing SMSF loan or need finance to buy a property investment in super, our experienced team of self-managed superannuation fund service providers can help you find the right SMSF loan.
SMSF Lending FAQs
What property types can be used as security for an SMSF loan?
Ultimately, the security asset will be determined by the lender. However, generally residential security or commercial security are acceptable property types for SMSF loans.
What are the lending limits for SMSF loans?
SMSF's can generally access up to 80% LVR. This means you could potentially borrow up to 80% of the property value with a loan term of usually up to 30 years, subject to credit assessment and survivability requirements.
What loan amounts can an SMSF borrow?
The minimum and maximum loan amounts for SMSF's will vary across lenders, however, they generally range from $50,000 up to $1,000,000.
How does an SMSF loan work?
An SMSF loan works similarly to a regular property investment loan. However, due to superannuation and taxation law, it needs to be structured differently. The property that's being purchased needs to be held in a separate trust known as a bare trust until the mortgage is repaid. This is so the lender does not have recourse against the funds other assets in case of default. Essentially, if the borrower defaults on an SMSF loan, the lender can repossess the property held in the bare trust, but cannot take any of the funds other assets.
Do I need a financial adviser to help with my SMSF?
If you're unsure of aspects regarding your financial situation, investment strategy or need tax advice, it's always a great idea to seek advice from trusted professionals. We have a range of contacts in our professional network and would be happy to put you in touch if needed.
How do I make loan repayments for my SMSF?
The loan repayments should come from the SMSF's bank account. This bank account does not have to be through the SMSF loan lender.
What interest rates are available to SMSFs?
SMSF interest rates are generally a bit higher than residential mortgage interest rates. This is because of the complex nature of investing inside a superannuation fund.
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