Over the last few years we have seen all of the major Banks remove themselves from lending to Self-Managed Super Funds. This was solely due to the limited recourse nature of this type of lending, meaning that if a SMSF was to default on their loan, the only recourse the Bank had to recoup the debt was through the asset purchased with the SMSF Loan. The Bank could not access any of the other assets in the SMSF to help repay the debt, which provided the SMSF members with additional protection of their other assets, but represented a greater risk to the lender which they offset by charging higher rates.
At present most SMSF loans with these Banks are being charged around 10%, and they are not prepared to review these rates at all. The Banks would seemingly prefer that these loans are refinanced and off their books, so they are not offering any discounts on these products to retain this business. If your SMSF has a loan with a lender who has exited this market, now is the perfect time to review your loan and obtain a much better outcome for your SMSF.
There are a number of Lenders who still offer property loans to a SMSF. The rates on offer to refinance could be over 3% better than your current lender is charging, which would represent a significant improvement in the cashflow for the SMSF, allowing you to invest in other areas or pay off the property loan quicker. Some lenders will also offer to reduce establishment fees for loans that are refinanced.
It is important to note that while refinancing an SMSF loan is allowed, according to the Superannuation Industry (Supervision) Act 1993 (SIS Act), you are restricted from releasing equity in the property to complete any renovations to the investment property unless those funds are necessary for upkeep to maintain the property at the market rent standard. You also cannot access equity to buy another property with the SMSF, or use the funds to invest in other markets such as shares or manage funds.
At SHL Finance, we are experts in SMSF lending and have helped many clients, with SMSF loans at very high rates, refinance into a much better financial position and making the process as painless as possible. Please call Reece Droscher on 0478 021 757 to find out more about improving your SMSF financial position can lead to a better outcome at retirement.
Reece Droscher
Director
Mobile 0478 021 757
Email reece@shlfinance.com.au
www.shlfinance.com.au
