Can I borrow in my self managed super fund?

Housing market predicted to grow strongly
August 24, 2013
Property Investors Driving Growth
September 2, 2013

Can I borrow in my self managed super fund?

Property investment through you self managed super fund given recent market volatility and uncertainty can be a sound strategy to generate wealth and is very doable but you really need advice from your mortgage broker to structure the loan effectively given the complexity associated with such facilities.

You will also need to set up a security trust on behalf of your super fund which will purchase the property.This trust will hold the property and guarantee the loan.

How does it work?

Speak your mortgage broker to ensure you understand what needs to occur and also you need to seek professional device to ensure your self managed super fund has the necessary powers to borrow.

The first step to purchasing an investment property through your SMSF is setting up a separate security trust on behalf of your SMSF. This new security trust will buy and hold the property, and provide a guarantee for your loan.

Loans to self managed super funds are “limited recourse loans”. This means that if you default the bank can only access:

  1. the investment property
  2. any other property securing the loan
  3. The bank won’t be able to access your other super assets.

When you compare loan offers you need to be careful. Interest rates for self managed super funds are generally higher and some bank charge business interest rates.

Remember the security trust buys and holds the property, rent payments flow through the super fund and pay off your loan.If the rent does not cover the loan the extra funds need to come from your self managed super fund.

After the loan is paid off in full the property can be transferred to your self managed super fund

It is important to remember you cannot refinance self managed super fund loans or live in the property you buy so it is important you seek advice to structure the facility accordingly.

Leave a Reply

Your email address will not be published. Required fields are marked *

03 8804 1354