How much super do I need to purchase a property with a SMSF?

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Su Lin
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Joined: Tue Sep 10, 2019 7:39 pm

How much super do I need to purchase a property with a SMSF?

Postby Su Lin » Tue Sep 10, 2019 7:40 pm

Hi, I set up my SMSF a few years ago with both me and my wife as the trustees. The fund’s current investment are mostly in shares, bonds and term deposits. We’re looking to diversify our investment and like to include some investment real estate. Let’s say I’m looking to purchase a $450,000 property for my SMSF. How much super do I need? The required deposit, fees and other costs involved will be helpful.

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Otto Dargan
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Re: How much super do I need to purchase a property with a SMSF?

Postby Otto Dargan » Tue Sep 10, 2019 8:15 pm

Hello Su Lin. Welcome to the forums.

We specialise in self-managed superannuation fund (SMSF) loans both new and established. Here’s a breakdown of all the funds required in your SMSF to purchase a $450,000 property with a SMSF loan:
  • Deposit: 20% or $90,000 (Please note that even though you can borrow up to 80% of the property value. Most lenders limit it to 70% for newly established SMSFs.)
  • Loan amount: $360,000
  • Government costs/ stamp duty: $22,500 or 5% of the purchase price (Discounts may be available for off the plan purchases)
  • Loan costs: $ 6,900
  • Liquidity buffer: $ 27,000 (The buffer allows for 18 months worth of interest coverage at an interest rate of 5% p.a.) Not every lender has the same liquidity requirement.
So, the total Super funds required is $146,400 approximately.

We strongly recommend seeking financial and legal advice so other fees for Financial Planning/ Statement of Advice may apply.

Major banks stopped offering SMSF loans in 2018, however, there are a range of non-bank lenders and specialist lenders still offering SMSF loans. And some of them are offering competitive SMSF interest rates. That’s who we’re working with.

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

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

Su Lin
Posts: 3
Joined: Tue Sep 10, 2019 7:39 pm

Re: How much super do I need to purchase a property with a SMSF?

Postby Su Lin » Wed Sep 11, 2019 1:33 pm

Your page mentions the banks will look at the last two years contribution plus the income from the rental income. Two questions, how much of the rental income is used? And can I declare on the application that I’ll be making extra contribution to prove the trust can service the loan?

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Otto Dargan
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Re: How much super do I need to purchase a property with a SMSF?

Postby Otto Dargan » Wed Sep 11, 2019 2:34 pm

Hi Su Lin,

Generally, lenders will typically use 80% of the rental income to account for property maintenance, repairs and management.

For new trusts, lenders will look at the current income of the trust beneficiaries, the previous super contributions, and their new proposed super contributions.

Lenders will access the loan based on the proposed super contributions if they are within the maximum concessional and non-concessional contributions allowed by the ATO, and if they can afford these contributions without financial hardship. The maximum non-concessional super contribution for the year 2019-2020 is $100,000.

You can use our SMSF borrowing power calculator to get an estimate.

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

Su Lin
Posts: 3
Joined: Tue Sep 10, 2019 7:39 pm

Re: How much super do I need to purchase a property with a SMSF?

Postby Su Lin » Wed Sep 11, 2019 2:44 pm

Why is the liquidity buffer so high in your calculation? $27,000 for a $360,000 loan? Are there lenders that don’t have this requirement?

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Otto Dargan
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Re: How much super do I need to purchase a property with a SMSF?

Postby Otto Dargan » Wed Sep 11, 2019 2:55 pm

Hi Su Lin,

Yes, the liquidity requirement with this is quite high, however, they’re also offering great interest rates on SMSF loans currently. So, even though you may have to meet stricter lending criteria, you get better rates.

Generally speaking, lenders want you to keep 10%-20% of the property value in your SMSF account in cash. Different lenders have their own post-settlement liquidity requirements so it’s best to speak with one of our specialist mortgage brokers.

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

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


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