SMSF Loans

Want a SMSF loan? Contact us

Why use Redwood home loans?
We are Chartered Accountants and Qualified Mortgage Brokers, we will set up your SMSF and Bare Trust compliant with Superannuation Law and provide the most suitable loan for you.

How does a SMSF Loan work?
Lets say an SMSF has $100,000 in savings and you would like to purchase a $350,000 SMSF property. Firstly, a Bare Trust is established to buy the SMSF property on behalf of your SMSF. Prior to purchasing SMSF property – contact a Redwood broker to obtain a pre-approval with a suitable lender. Once pre-approved at 80% loan to value ration (“LVR”) or $280,000 using a limited recourse loan. You will sign a contract of sale and your super funds pays a $35,000 deposit or 10% of the property value and you request a loan at. The costs to complete are paid from the SMSF including Stamp Duty, SMSF Loan application fees and legal fees.

Income:
The SMSF will lease the property at say 5% rental yield ($17,500 p.a). Members will continue to contribute at 9.5%.

Expenses:
Assuming an interest rate of 5.6% ($15,680 p.a), your property will be positive excluding holding costs such as property management costs (5-7%), water, rates. You will be entitled to a depreciation deduction which will reduce your taxable income. Product features such as an offset account may enable you to pay off your loan faster.

A Redwood Broker will ensure you receive the most suitable home loan at no cost to you.

Useful calculators:

How much can I borrow?

Home loan calculator

Stamp duty Calculator

Income tax calculator

SMSF Loans & Borrowing Checklist

Redwood Home Loans and Redwood Advisory SMSF Specialists will guide you through the SMSF Loans process from SMSF Set-up to settlement to ensure there are no surprises. After all – SMSFs are supposed to be fun.

Below we describe the steps taken to ensure a smooth SMSF Loan process.

1. Your SMSF must be established before your purchase a property or apply for a loan
Before you apply for a loan or sign a contract of sale for the purchase of property, Redwood Advisory establish the SMSF before purchase date.

2. The SMSF Trust Deed must be compliant
It is important that your Trust Deed is prepared by a Lawyer and includes borrowing powers. If your Trust Deed is dated before 2010, we strongly recommend a “Deed of Variation” which will include the required borrowing powers. This will ensure there are no nasty surprises and a large bill from the banks legal team.

3. SMSF Investment Strategy
It’s a requirement to regularly review your Investment Strategy, which will include the asset allocation to Property and Insurance considerations for your SMSF.

4. SMSF Loan Pre-approval
Generally you would like to know how much you can afford prior to purchasing a property. A key step is to apply for a pre-approval with a suitable lender as determined by your Redwood Broker. Once pre-approved, your nominated lender to provide an ‘indicative loan offer’ for your Fund. This will provide an indication the loan amount, interest rate and Loan to Value Ration (“LVR”).

5. Find an SMSF Property
An important part of the process is selecting an SMSF Property including residential and commercial property. The type of property will impact the LVR, for example, generally the LVR for residential property is 80% and for commercial property is 70%. Depending on the type of property you are searching for the lenders criteria may vary. For instance, certain lenders will reduce LVR for off-the plan investments and may exclude vacant land or rural property.

6. Establish a Custody/ Bare Trust
This may sound complex but it is relatively straightforward when performed by Redwood Advisory – SMSF Specialists. Redwood Advisory can arrange the Custody Bare Trust to be prepared at a reasonable fee. The Bare Trust is set up before the contract of sale is signed.

7. The investment loan must be a limited-recourse loan and may included personal guarantee
The loan will have to be secured against the property that is to be purchased and may include a personal guarantee.

8. Contract of sale
Once you have completed your due diligence and completed the set up of the Bare Trust, you will be required to sign the contract of sale. Please ensure you contact Redwood Advisory for guidance on the name to be used on the contract of sale – this will differ for each state.

9. Appoint a Solicitor/ Conveyancer
It is imperative to appoint a conveyance/ solicitor with experience in SMSF Property. For Residential Property expect a fee around $700-1000 (varies by state) and for Commercial Property expect a fee of around $1000-1500.

10. How many days should I leave for settlement?
An SMSF loan is like no other – the documents submitted to a lender will include:
• SMSF Loan Application
• SMSF Trust Deed
• SMSF Custody Bare Trust
• Contract of Sale
• Prior year SMSF Financial Statements and Tax Return
• Proof of income for all members
• Other documents to be determined by the lender

Please ensure you allow 45 days from the contact of sale to enable a smooth and efficient loan process. SMSF’s should be fun, allow an adequate period of time to ensure there are no headaches at settlement time.

Call a Redwood broker and you will be on the road to Financial Freedom. Call now for a FREE consultation.

Important Disclaimer – The content has been prepared by Redwood Advisory Pty Ltd without taking account of the objectives, financial situation or needs of a particular individual and does not constitute financial product advice. This article should not be considered personal financial advice as it is intended to provide factual information only.

Redwood Advisory Pty Ltd – ABN 291 6155 3591
Ivan Filipovic is an Authorised Credit Representative (License Number 470205) of NBG Financial Pty Ltd (License Number 394343)