Considering a SMSF loan? We bust some Myths!

Borrowing in an SMSF – Myths Busted

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1. There aren’t many lenders offering SMSF loans

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There aren’t many banks offering SMSF loans, but there are dozens of non-banks and new lenders are offering SMSF lending regularly, the latest entrant to the market being Pepper.

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2. It is impossible to refinance an SMSF, so I am stuck on the higher rate that my bank has me on

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As banks have pulled out of SMSF lending it is more expensive for them to keep maintaining their legacy SMSF loans. Hence their customers bear the brunt of this with higher interest rates. The fact is that refinancing an SMSF loan is often easier than refinancing a home loan.
Several lenders now offer an option where if the rent covers the loan repayment and the interest rate you are refinancing to is lower, subject to a valuation and clear history you are eligible to refinance.

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3. You can’t fix the rate on an SMSF loan
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Now that more lenders are in the SMSF market, there are is an increased variety of loans available, including many fixed rate options
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4. You need a higher deposit for an SMSF loan

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Again with more lenders entering into SMSF lending, liquidity requirements are often being waived and higher LVR’s (up to 80% for commercial property) are available.

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5. You can’t redraw on an SMSF loan
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We have a lender offering limited redraw functionality (funds must be used to improve the security property)

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6. You can’t offset an SMSF loan

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Many lenders offer an offset facility with their SMSF loans. Check with your accountant or financial planner for their view, but we reckon having an offset account for your SMSF is helpful, especially if you want to reduce interest expenses but have the option to invest again in future
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The reality is that investing into a residential or commercial property within an SMSF is increasingly straightforward with many lenders improving the competitiveness of the sector, reducing approval timeframes and bringing in new product features.
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If you’ve been considering borrowing in your SMSF, talk to the SMSF lending experts at North Coast Lending.

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