What is a Self Managed Superannuation Fund (SMSF)?

A SMSF is a special type of trust that people can set up to manage their own superannuation. Like a normal super fund, your employer contributions still get paid into the fund and you can still make additional contributions as you see fit. Unlike a normal super fund, you (or the trustee) have direct control over the assets that your superannuation is invested in.

Keep in mind that there are special rules governing how super funds must be run, and you cannot use a SMSF to gain early and improper access to superannuation. In 2007 the laws were changed to allow SMSFs to borrow as long as certain requirements were met.

Why don’t most banks lend to super funds?

The majority of lenders do not lend to super funds to buy investment properties because of the smaller size of the market, the complexity of trust loans and because the lender’s recourse is limited to the asset itself.

What does this mean? To a lender it is more work, for a higher risk loan for a lower profit! However not every lender sees it the same way, some lenders will even allow discounted residential loans to be used by super funds.

How much can you borrow?

Standard loans (full doc): 72% of the property value.

Investment loans: 72% of the property value.

Low doc (no income evidence): 60% of the property value on a case by case basis.

Commercial property: 70% of the property value.

Discounts: Most lenders add a margin to their normal residential loan rates for SMSFs.

Note: Lending policies for SMSFs vary between lenders. Please contact us to find out which lender is most suitable for your mortgage.

When is a SMSF allowed to borrow money?

There are laws restricting the use of SMSFs to borrow money, and restricting the recourse of the lender in the event that the trust was unable to meet its repayment obligations. For this reason, it is not uncommon for the lender to ask for an additional loan guarantor outside of the SMSF.

• The asset is an asset the SMSF could otherwise legally acquire (if it had the funds).
• The asset is held on trust for the SMSF using a Security Trust.
• The SMSF acquires a beneficial interest in the asset from the outset.
• The SMSF has the right to acquire legal title on making one or more payments.

Which banks have loans for SMSF trusts?

The major banks have not all decided to lend to super funds, leaving many bank customers unable to obtain investment loans for their SMSF without seeking out a specialist broker. We know which lenders can help with your residential or commercial property investment, please contact us to find out how much you can borrow.

Apply for a SMSF loan

There are few mortgage brokers or bank managers that understand self managed super funds and even fewer that are experts in lending to them. By using our services you can be sure to get the best advice for your trust loan.