$5 million needed in my SMSF for a NAB SMSF loan?

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Shawn P
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$5 million needed in my SMSF for a NAB SMSF loan?

Postby Shawn P » Wed Apr 24, 2019 6:18 pm

Hi, I applied for a NAB SMSF loan but I was declined because apparently, they require me to have at least $5 million in my trust. I don’t understand this.
I have two investment properties worth $1.2 million and I’m looking to add another property to my investment portfolio. First, why did most banks pull out of self-managed super fund lending? And is it still possible to borrow within SMSF?

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Otto Dargan
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Re: $5 million needed in my SMSF for a NAB SMSF loan?

Postby Otto Dargan » Wed Apr 24, 2019 6:43 pm

Hello Shawn. Welcome to the forums.

Yes, it’s still possible to borrow within SMSF. There’s a range of non-bank lenders who still offer SMSF loans and that’s who we’re working with. Even though NAB technically still offer SMSF loans, in reality, they don’t. Like you mentioned, with NAB you’d need to have $5 million in your SMSF, so yeah less than 1% of the population will qualify for it.

There are several reasons as to why most banks pulled out of self-managed super fund (SMSF) lending:
  • During the Royal Commission, there were a few case studies about SMSF, where customers were given poor financial advice. In particular, there
  • were a lot of people who weren’t that wealthy who were buying properties in their SMSF. If you have millions in your super then sure, it makes sense but if you have only $200k in super, then the expenses of managing an SMSF probably means it may not be a good deal for you.
  • Some customers are also not familiar with SMSF rules and so they accidentally break them. For example, you can’t live in the investment property that’s in your SMSF.
  • So, banks are scared for their reputation. Pretty much all the major lenders have stopped doing SMSF lending.
  • The complexity of meeting the regulatory requirements and the return on investment of SMSF is not worth the risk for some lenders.

Speak with one of our specialist mortgage brokers by giving us a call on 1300 889 743 or by filling in our free assessment form to find out if you qualify for an SMSF loan.

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

Shawn P
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Joined: Wed Apr 24, 2019 6:17 pm

Re: $5 million needed in my SMSF for a NAB SMSF loan?

Postby Shawn P » Wed Apr 24, 2019 7:17 pm

In addition to a new SMSF mortgage, I would also like to discuss my options regarding the SMSF mortgage I already have with AMP. Currently, I’m paying 6.29% in interest with a mortgage balance of $492,000. It’s a residential investment property valued at $820,000.
Can I refinance my SMSF loan to a better interest rate?

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Otto Dargan
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Re: $5 million needed in my SMSF for a NAB SMSF loan?

Postby Otto Dargan » Wed Apr 24, 2019 8:28 pm

Hi Shawn,

Yes, you can refinance your SMSF loan, in fact, you should.
A lot of people have an SMSF loan with a major bank who’ve pulled out of lending in this sector such as St George, CBA, NAB, Westpac, Macquarie and AMP. There’s simply fewer options for them refinance. Typically, when there is a group of customers with existing loans and it’s hard for them to refinance, the banks put their interest rates up. Maybe not today or tomorrow but sooner or later. So, SMSF customers such as yourself may find themselves as mortgage prisoners stuck on high rates, particularly, if the non-bank lenders pull out of SMSF lending as well.

There are some pretty good deals to be had in SMSF loans. For example, if you owe less than 65% of the property value, you may be eligible to get an SMSF loan with a great interest rate at 4.99%.

A lot of existing borrowers are on rates over 6% so it’s definitely worthwhile to refinance. If you were to cut the interest rate by 1.5% on your $492,000 SMSF loan with AMP then you can save $7,380 a year in interest.

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

Shawn P
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Joined: Wed Apr 24, 2019 6:17 pm

Re: $5 million needed in my SMSF for a NAB SMSF loan?

Postby Shawn P » Thu Apr 25, 2019 11:42 am

That’s great. What will the liquidity requirements after settlement be? Are ASX traded shares accepted as liquid assets?

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Otto Dargan
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Re: $5 million needed in my SMSF for a NAB SMSF loan?

Postby Otto Dargan » Thu Apr 25, 2019 3:48 pm

Hi Shawn,

Yes, shares traded in the Australian Securities Exchange (ASX) are accepted as liquid assets.

It varies but generally speaking, the post-settlement liquidity requirement is between 10% and 20% of the property value in cash within the SMSF. We have some lenders who do not have a liquidity requirement. The fund can use all of its cash in the purchase.

We specialise in SMSF loans and have almost 40 lenders on our panel to choose from.

Give us a call on 1300 889 743 or fill in our free assessment form to find out if you qualify for an SMSF loan with the most competitive rates on the market today.

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


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