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Features of SMSF Property Borrowing

Common Features of the SMSF Structure

• Choose any kind of property including residential, commercial, retail, and holiday units.

• A super fund can purchase real estate let for business purposes from a member or a related entity (i.e. this does not breach the “in house asset” rule under the SIS Act). Investments in property other than “business real property” are permitted provided the purchase is from an arms-length vendor.

• The legal owner of the real estate will be the Property Trustee.

A happy senior couple sitting on the front of a sail boat on a calm blue sea

• The beneficial owner of the real estate will be the SMSF.

• The lender has no recourse to the other assets of the SMSF, providing the SMSF with absolute protection for its other assets.

• The loans are personally guaranteed by the member/s of the SMSF (subject to credit approval). SMSFs can deal with the property however and whenever they like, in the same way as investors can deal with “normal” investment properties (e.g. lease, renovate, repair, or sell), (subject to the terms of the relevant loan and mortgage).

• All rents are paid direct to the SMSF. Loan repayments are made in the ordinary way from the SMSF.

• The SMSF can pay out or reduce the mortgage at any time (subject to the terms of the relevant loan).

• When the mortgage is paid out in full, title to the property can be transferred to the SMSF or the Property Trustee can continue as the registered proprietor.

Common Features of SMSF Loans

• Residential securities: 70% LVR for Full Doc Loans;

• Commercial securities: 60% LVR for Full Doc Loans (including any further advances for credit fees and charges payable on
or before settlement);

• Maximum loan size – $2m for Residential securities, $5m for Commercial securities;

• Maximum exposure to any one guarantor – $6m in total;

• Post codes – Metropolitan & some Regional areas (please ask if unsure);

• Purchases only – except certain commercial properties which fall within the exemption to the “related party” prohibitions in the SIS Act;

• Loans can be Principal or Interest Only Loans.

• Loan term:

Residential – 30 years (max 5 years interest only);
Commercial – 25 years (max 5 years interest only);
Due to SIS Act restrictions, no top ups or redraws allowed.

If you want to know more contact a Specialist SMSF Solutions adviser today, on 02 4942 0280.