At Synergy Finance, we assist SMSF trustees in securing tailored loans to invest in residential or commercial property through their self-managed super funds

What is SMSF Lending?

SMSF lending refers to borrowing arrangements that allow Self-Managed Superannuation Funds (SMSFs) to purchase assets such as property or shares. These arrangements are strictly regulated and must comply with superannuation laws.

Limited Recourse Borrowing: Lender's claim is limited to the specific asset purchased

Special Purpose Vehicle (SPV): Bare Trust is required to hold the asset and corresponding loan

Loan Terms: Often shorter than standard mortgages, typically 15-25 years

Deposit Requirements Generally higher but, Loan-to-Value Ratios (LVRs) up to 90% are available in the right scenario.

Interest Rates: Usually higher than standard residential mortgages.

  • For purchasing residential investment properties
  • For buying commercial real estate, including business premises

  • Strict compliance with Superannuation Industry (Supervision) Act 1993
  • Focus on the fund's ability to service the loan
  • Assessment of the quality and value of the underlying asset
  • Consideration of the fund's investment strategy and risk profile

  • Protects other SMSF assets in case of default
  • Requires creation of a separate trust for each asset purchased
  • Allows SMSFs to invest in assets they might not otherwise afford

  • Higher costs due to complex structure and additional legal requirements
  • Potential for increased returns through leveraging
  • Risk of reduced diversification if a large portion of fund is in one asset
  • Importance of maintaining liquidity for member benefits and expenses

  • Overseen by the Australian Taxation Office (ATO)
  • Strict rules on what can be purchased and how loans can be structured
  • Recent focus on ensuring SMSF borrowing aligns with retirement goals

Remember, SMSF lending is complex and requires careful consideration. It's mandatory to seek professional financial and legal advice before proceeding with any SMSF borrowing arrangement.

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