SMSF Property Loan
A self managed superannuation fund (SMSF) gives your property investment flexibility. With an SMSF, you can invest directly in residential or commercial property using the funds you’ve accumulated in super. This is a great way to build wealth for your retirement.
The SMSF Property Loan is a loan product which provides self-managed super funds the flexibility to borrow in order to purchase residential investment property, giving direct exposure to real property assets. A key reason people may elect to manage their own superannuation is the flexibility to choose where their money is invested. The Superannuation Industry (Supervision) Act 1993 (SIS Act) allows SMSFs to borrow money to purchase residential investment property.
It’s recommended that you seek independent legal, taxation and financial advice to ensure it is appropriate for your SMSF to borrow money and purchase an investment property. Once you have received this advice, you can begin establishing the trust structures required for the loan, ensuring you comply with the relevant superannuation laws. The loan would then need to be taken out by the SMSF trustee.
In addition you will also need to set up a separate holding trust (also called Bare Trust), which will be the legal owner of the property, and the holding trust trustee . To purchase the property, the SMSF can use the fund it has available in cash and borrow the remaining funds plus other associated costs, using the investment property as security for the loan.
The holding trust becomes the legal owner of the property, while the SMSF is the beneficial owner and receives the rental income. The rent (and/or other income from the SMSF, such as investment income and super contributions) can be used by the SMSF trustee to make the loan repayments.
It’s important to note that the loan is a limited recourse loan. In the event of a default, the lender has recourse to the property security and any additional security provided by the guarantors. The Lender will not have recourse to any other assets held in your SMSF. Once the loan is repaid the legal ownership of the property may be transferred to your SMSF.
At Mortgage Empire, we want to make sure we take the hassle out of the whole SMSF Property loan process. Here are the 15 main steps to loan process. The main difference between SMSF Property loan and other loans are that SMSF Property loan is assessed based on your SMSF income, which is your Superannuation Contribution, Property Rental Income and Other Forms of Incomes that your SMSF generates.
1. Discuss Your Requirements & Objectives +
2. Complete Factfinder +
3. Provide Supporting Documents +
4. Research Loan Options +
5. Credit Assessment Statement +
6. Select Loan Product +
7. Sign Loan Application +
8. Apply To Lender +
9. Provide Additional Documents +
10. Property Valuation +
11. Loan Formal Approval +
12. Sign & Return Loan Documents +
13. Home Insurance +
14. Organise For Funds +
15. Settlement Day +