In a nutshell,
Many Australians are now switching to SMSFs as it’s a way to utilise your largest untapped asset: your super balance. With a Squirrel SMSF and loan, you can get your feet on the property ladder and make your superannuation work smarter for you.
Whether you’re investing in a residential or commercial property, Squirrel offer low fee and competitive rates for our SMSF customers.
SMSF Residential Property Loan
- Maximum LVR 80%
- Loan amount up to $1,000,000
- Principal and Interest (P&I)
- Loan Type: limited recourse loan
- Max 30 years
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Our team of Super specialists and Squirrel advisers are on hand to help you put together an investment strategy that will build your wealth.
Why Squirrel Loans?
We are an SMSF loan expert helping you from setup to settlement and can provide guidance on the ATO rules and regulations around your property purchase.
We believe in offering exactly what it says on the tin. That’s why there are no hidden costs or charges with any of our loans.
All in one place
By having your SMSF and loan all in the same place, there’s less paperwork, less hassle and a smooth process for you to purchase the investment property you want.
Why borrow for your SMSF?
Since 2007 superannuation laws have allowed an SMSF to borrow money in order to purchase an investment asset, as long as a strict set of rules are followed. Under the superannuation borrowing rules, an SMSF can borrow money to buy any type of asset permitted by the superannuation law such as property.
Like a traditional investment property, the SMSF can borrow some of the funds needed to purchase a property. This allows borrowers to use their superannuation in a much more efficient manner than purchasing the property outright.
Squirrel will loan a maximum of 80% of the value of the property. By borrowing, an SMSF fund increases its ability to buy property which in turn can provide higher levels of overall growth and income.
All payments to the property (including Loan repayments, water rates, management fees and council rates) must be paid from the SMSF and hence can be offset against rental income from the property.
Loans For Residential Properties And Superannuation Laws
Loans to SMSFs must comply with superannuation laws. Our key observations are as follows
- Expect an LVR of no more than 70%
- Your interest rate will start at 5.6% p.a., as it’s an investment loan
- Typically, the maximum loan size will be $1 million, but lenders will consider exceptions
- Do not put a deposit on a property in your name, and expect it can be transferred across to the SMSF.
- There will likely be some restrictions on some properties – which is common to all property lending. For example, the apartment can’t be too small, the property can’t be located somewhere that no one can find it
- Try to find a property you can rent. A lot of properties will need both income streams (your super and the rent) to service the loan.
- If you have a loan over the property, the law restricts what you can do with the property. You cannot modestly improve it, conduct a business out of it or rent it to your mother-in-law for subsidized rent. Everything must be “arms-length”!
Are there any restrictions when borrowing through an SMSF?
- Your loan balance is the maximum you can borrow against the property. Let’s say you borrowed $250,000 to buy a $350,000 property 5 years ago. You’ve lucked out, and the property is now worth $500,000, and the debt on it is now $200,000. The law will only allow a lender who is re-financing, to give you $200,000.
- Redraw is not permitted under the law. Any additional repayments will reduce the debt. If you have an extraordinary circumstance, like a large strata payment, some lenders may advance you the funds.
- The loan and the property will be legally held in a separate trust from your other SMSF assets. Squirrel will set this up for you, quickly and easily (and at no additional cost!) – show us a pre-approval from the lender and we’ll take care of the rest!
- The loan will be limited recourse to the property it is secured against – however you, and each of the other members of your SMSF, will be required to sign personal guarantees to cover the lender against losses.
- What this means is – all SMSF members are responsible for there being enough money in the SMSF bank account. If your tenant leaves, if your boss doesn’t pay your super on time, you may need to deposit money from your own savings into the account to cover any potential shortfall.
More on SMSF Loans
SMSF loans are generally under a Limited Recourse Borrowing Arrangement (LRBA), which are used to buy both residential and non-residential properties by the SMSF.
Buying property with an SMSF has been growing in popularity over the last decade, with the most recent ATO Quarterly SMSF Statistics indicating that limited recourse borrowing arrangements have grown by 93%, from $1.4 billion in June 2011 to more than $21.8 billion by June 2016.
The reason SMSF loans are described as a “limited recourse’ is because if the loan defaults, the lender is limited to seeking compensation via the specific asset bought with the loan. This means there is no recourse to the other assets held in the SMSF or the trustees themselves.
As SMSF specialist, Squirrel have the expertise and experience to set up your SMSF and loan in a timely and compliant manner. As we do not offer normal home loans, all of our speciality and attention centres around SMSF loans for our SMSF clients.