Self-Managed Superannuation Funds
(SMSF) Loans
A Self-Managed Super Fund is a form of retirement fund from which members have control over their retirement savings.
Legislation in Australia allows SMSF to invest in real estate.
How does SMSF work?
WHICH LENDERS OFFER SMSF LOANS?
Not all lenders offer loans for SMSF.
The lenders that do provide loans for SMSF have very different policies.
- Some provide loans for residential property only, some commercial property only and some offer loans for both types of investments.
- Some offer offset accounts, some don’t.
- Some require minimum balances in the SMSF, some don’t.
- Some loan to newly set up funds, some don’t.
- Some review the guarantors financial position, some don’t.
SMSF Loan Approval Process
1. Establish Your SMSF
The Trust Deed establishing the SMSF must give the Superannuation Fund Trustee power to:
i. purchase real estate,
ii. borrow money, and
iii. mortgage property to secure repayment of that borrowing.
2. Obtain Loan Approval
We recommend a SMSF loan ‘pre-approval’ prior to exchanging any contracts and paying deposit monies.
3. Establish the Bare Trust Deed
The Property Trust Deed can be established once ‘pre-approval’ is obtained.
It is NOT required prior to applying for the loan.
In some cases a template will be provided for your accountant or financial Adviser to ‘cut & paste’ the relevant information, including the security property details and trustee information.
4. Purchase Contract can be formalised.
When contracts are exchanged or made unconditional between the seller as vendor and the bare trustee as purchaser, the deposit will be paid by the SMSF.
5. Valuation Ordered & Formal Loan Approval.
Once you have signed your purchase contract and returned to us, the lender will order a valuation and once returned and all outstanding conditions are satisfied, formal approval for your SMSF loan will be issued
6. Lenders Solicitors prepare & issue Mortgage Documents.
The lender will instruct solicitors to prepare your mortgage documents and be issued to you for signing.
The SMSF borrowing structure uses normal loan and mortgage documents with special provisions to provide the limited recourse against the property being purchased.
7. Settlement.
The purchase is completed.
After registration of the transfer on the mortgage, the transaction/title documents will be held on behalf of the lender.
