Are you looking to buy a property for your self-managed superannuation fund (SMSF)?

Banks will be looking at your personal financial stability and the size of your deposit, as well as the liquidity position of your trust.

So what are the capital requirements and how big of a deposit do you need for an SMSF loan?

Is your deposit enough?

To buy a residential property for your SMSF, you generally need 20-25% of the property value as a deposit.

You also need an extra 5% of the property value to cover the costs of completing the purchase. This little bit extra covers such expenses as stamp duty, mortgage transfer fees, the costs of a conveyancer and other legal expenses.

What if I want to buy a commercial property?

For commercial properties, you need at least a 30% deposit for an SMSF loan plus 5% for the costs of completion.

Are there no deposit solutions for SMSF loans?

No there isn’t, however, existing funds in your managed super account can be used as a deposit. You can move these funds to your SMSF so, effectively, you don’t need a deposit!

There can be huge differences in lending policy and interest rates depending on whether we can get you approved with the lender’s residential or commercial banking arm!

Read these tips about comparing SMSF loans.

Call us on 1300 889 743 or complete our free assessment form and speak to one of our mortgage brokers about borrowing for SMSF.

How will they assess my personal financials?

Banks will go through the same due diligence as they would with a typical home loan application.

In most cases, they will ask for your most recent payslip if you’re PAYG or your last two years tax returns if you’re self employed. This will show your after-tax income.

They will also look to see that you have stable employment, all of which gives them confidence in your capacity to make the SMSF loan repayments.

The great thing is that there are lenders that will also take into account proposed rental income for the property that you’re buying. Most will use up to 80% of rental income but some lenders will use 100%.

Borrowing at the maximum Loan to Value Ratio (LVR) comes down to choosing the right lender.

What about my SMSF financials?

You’ll firstly need to provide a copy of the trust deed for the SMSF that explains the restrictions and rules around borrowing money and acquiring a beneficial interest in the asset you want to buy.

If the bank is satisfied, there is usually a requirement for the SMSF to have a minimum net worth of at least $200,000 including assets and dividends from existing investments. However, not all lenders require you to have this in order to borrow.

Will the bank use income from beneficiaries of the SMSF?

Yes! Some will use this income to support your application if a personal guarantee is provided.

You can use our SMSF borrowing power calculator to see how some of our banks would assess your situation.

Don’t forget about the liquidity requirement

After the total cost of purchasing the residential or commercial property is taken into account, you may have to pass what is known as a post-settlement liquidity requirement with some banks.

This means that there must be a certain amount of income and assets left over in the trust after your complete the purchase.

Generally, you need around 10-20% of the total assets remaining after the purchase. With one lender, this jumps up to 40% if you’re near retirement age!

However, not all lenders have a liquidity requirement!

Not sure if you have enough deposit for an SMSF loan?

Call us on 1300 889 743 or complete our online enquiry form and we can properly assess your situation.

We can then match you with a lender that will accept different types of income in order for you to qualify for an SMSF loan.

  • Tarrant

    It’s stated that a 20-25% deposit is generally required and an extra 5% on top of that to cover additional costs. I only have 15% overall so won’t this be enough?

  • Hey Tarrant,

    Existing funds in your managed super account can be used as a deposit. So if you can move those funds to your SMSF to cover the rest of the deposit, it should be all good. However, a 15% deposit in itself may not be accepted by most lenders. Please call us on 1300 889 743 or enquire online if you want to discuss this with an expert SMSF mortgage broker:

  • Ajay

    I’m in the process of setting up a SMSF, let’s say I purchased a 650k through my SMSF, my concern is that it will reduce my borrowing power or is that not how it works?

  • Hi Ajay,
    It will not reduce your borrowing power. With a SMSF loan how much you can borrow depends on whether or not you have sufficient income in your self-managed super fund (SMSF) to support the loan. The annual super income and rental income has to cover the interest. The SMSF is a different entity. You would just be a guarantor in the loan. It is not based on your income.

  • Ajay

    Okay. What if rental income and annual super are not enough to cover the interest, can we say we are going to make more contribution to super every year to get the loan?

  • Hi Ajay,
    You could, however, generally, lenders typically look at the last two year’s contribution to the super.