Which banks have loans for SMSF trusts?
Which banks give loans to SMSF?
With such a low interest rate environment upon us, many investors have grabbed hold of the opportunity to borrow at record-low interest rates, with the goal of investing in property. Particularly for Australians with Self Managed Super Funds, small interest means big opportunity when it comes to borrowing to purchase an investment property. But how easy is it to get a loan for your self-managed super fund (SMSF)?
As SMSF Loan Experts, we walk you through which banks will lend money to SMSFs for commercial and residential property purchases, and some tips and tricks to be mindful of when borrowing to invest in your super.
How does borrowing in my super fund work?
Borrowing within a self-managed superannuation fund 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 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.
Can I get an SMSF loan through one of the big four banks?
Self-managed super fund lending hasn’t been offered by Australia’s ‘Big 4’ banks since 2018. 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 SMSFs include (but are not limited to):
A property loan through one of these lenders comes with fees and charges, plus an interest rate, just like a regular mortgage does.
How do I know which SMSF Loan is right for me?
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.
Why are there so few banks that will lend money to SMSFs?
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 properties 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, can your SMSF afford to not partner with us?
We can help!
Whether you’re looking to refinance your SMSF loan or need finance to buy a property investment in super, we can help. Make the call to get the right information to make sure you can take advantage of low interest rates and better investment potential, today.