My AMP SMSF loan got knocked back! Need a lender that can help me

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Fardeen
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My AMP SMSF loan got knocked back! Need a lender that can help me

Postby Fardeen » Tue May 14, 2019 4:15 pm

I’ve managed my SMSF for the past few years and now I’m looking to add another property. I was knocked back for an AMP SMSF residential loan because one of their loan officers told me that they’ve stopped offering SMSF loans.
Are there other lenders who can lend me the amount I need? If so, how do I qualify for one?

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Otto Dargan
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Re: My AMP SMSF loan got knocked back! Need a lender that can help me

Postby Otto Dargan » Tue May 14, 2019 5:14 pm

Hello Fardeen. Welcome to the forums.

Yes, there are select lenders that will lend up to 75%-80% of the property value to a self-managed superannuation fund (SMSF) to purchase a residential property.

To qualify for an SMSF residential loan:

  • You’d need 20%-25% of the property value as a deposit for an SMSF loan plus an extra 5% of the property value to cover stamp duty and other costs of completing the purchase.
  • The maximum you can borrow is up to 80% LVR.
  • The SMSF net worth must be over $150,000.
  • Postcode restrictions apply. Metro locations (CAT 1) are preferred by lenders.
  • Interest-only is only offered by a few lenders.

Give us a call on 1300 889 743 or fill in our free assessment form to find out if you qualify for an SMSF residential loan.

Cheers,
Otto Dargan
Mortgage Broker
P | 1300 889 743
Home Loan Experts

Fardeen
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Joined: Tue May 14, 2019 4:13 pm

Re: My AMP SMSF loan got knocked back! Need a lender that can help me

Postby Fardeen » Tue May 14, 2019 6:10 pm

I’ve managed my super fund as the sole trustee for the last decade and I simply don’t understand why banks pulled out of SMSF loans? Does the Royal Commission have anything to do with this?

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Otto Dargan
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Re: My AMP SMSF loan got knocked back! Need a lender that can help me

Postby Otto Dargan » Tue May 14, 2019 6:46 pm

Hi Fardeen,

Lenders who have pulled out of SMSF lending include: St George, Westpac, Macquarie, AMP, CBA, NAB (still in but require $5m in SMSF so, in reality, they’re not really in), BankWest, ANZ, RAMS and the list goes on.

SMSF loans are seen as a high reputational risk to some banks in the event that you were to default on your mortgage. These banks want to avoid negative publicity, particularly after a handful of case studies were used as examples in the recent Royal Commission into the banking and financial services industry. Basically, some borrowers were recommended the wrong products and didn’t seek adequate financial advice before purchasing a property for their SMSF.

Most people that have a self-managed superannuation fund (SMSF) are not necessarily high net worth individuals, which again relates back to potential negative personality.

However, the other reason some lenders have stopped SMSF loans has to do with the complexity of meeting the regulatory requirements - the return on investment is not worth the risk with some lenders because, again, they don’t tend to be large loans.

Cheers,
Otto Dargan
Mortgage Broker
P | 1300 889 743
Home Loan Experts

Fardeen
Posts: 3
Joined: Tue May 14, 2019 4:13 pm

Re: My AMP SMSF loan got knocked back! Need a lender that can help me

Postby Fardeen » Tue May 14, 2019 7:16 pm

I distinctly remember having to sign a personal guarantee for my first mortgage through my SMSF. It defeats the whole purpose of limited recourse borrowing. Do I need to provide a personal guarantee for my SMSF?

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Otto Dargan
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Re: My AMP SMSF loan got knocked back! Need a lender that can help me

Postby Otto Dargan » Tue May 14, 2019 7:27 pm

Hi Fardeen,

You hit the nail on the head in regards to limited recourse borrowing arrangement (LRBA). The LRBA structure limits the recourse of banks and other creditors to the asset you’re using as security protecting all the other assets held in the super fund. You can see why a lot of lenders are asking for personal guarantees from SMSF members to protect themselves. A personal guarantee doesn’t mean you to chip in money every month for the mortgage repayments. However, if the SMSF blows up and you default on the mortgage, the lender can come after you if the sale of the asset doesn’t cover the loan.

While it may seem to go against the concept of “limited recourse”, lenders are still able to impose this requirement because there are only a few lenders that operate in this space.

However, not all lenders require a personal guarantee. If the SMSF is able to operate independently with enough liquidity then the lender may waive the personal guarantee. The decision to waive the personal guarantee requirement ultimately depends on the lender.

We can help you find a lender that doesn’t require you to provide a personal guarantee for an LRBA loan.

We almost 40 lenders on our panel to choose from and credit expertise in SMSF and LRBA lending.

Give us a call on 1300 889 743 or fill in our free assessment form to find out if you qualify for a home loan.

Cheers,
Otto Dargan
Mortgage Broker
P | 1300 889 743
Home Loan Experts


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