Best SMSF loan/ provider?

Has anyone recently taken out a loan via their SMSF to borrow and buy property?

Which bank/ lender did you choose & why? Which loan product/ features?

Any experience to share of their process (how smooth it went, how long it took, pitfalls to watch out for, etc)

(we have a SMSF with corporate trustee, just looking to set up the bare trust and select a lender).. thanks
 
You cannot do equity releases via SMSF loans so its key to go interest only with a linked offset and save your principle payments in the offset which you can reuse to invest again.

There are only 3 lenders that have an offset - St George, AMP and The Rock.

SMSF servicing is more conservative than "normal" servicing. You may be able to use additional super payment however some lenders like AMP must see previous additional contributions to factor this in whereas other lenders like St George do not.

Fees will vary but you are looking at approx $2k in lender fees.

Other quick tips:

1. Make sure the Trust Deeds are certified by a JP
2. Make sure the contract of sale as the bare trust and not the SMSF
3. Make sure you go with a lender that has an offset
4. Make sure servicing is going to be ok upfront

Arguably its hard to go past St George for SMSF.
 
I've done loans for clients and st g has worked out very well
- no personal guarantee required
- offset account

But La Trobe has a much lower interest rate than St G, so it all depends.
 
Shahin has done a loan for a smsf client and it is hard to go past STG. These days the guarantee applies to all / most however. The old days of no guarantee seem to have been shutdown by Westpac.

I saw an AMP lend with a client and it was expensive and a bit messy...May have been the different broker ? They get fussy about contribution history for a new fund where STG dont.

Shahin is a mortgage broker who was very good at all the fine details and focussed on timing which can be a concern with all SMSF lends. I would argue using a VERY good broker like Shahin is the key. His experience drives the results.

I add to Shahins tips:
5. Get financial advice sign off (Lender will ask for it). We do it all inhouse which some dont.
6. Rollovers need focus - Industry funds hang onto $ and they need aggressive pursuit. The rollovers should also consider insurance policy loss.
7. Demonstrate loan serviceability through contributions + cashflows.
8. Use a great broker who knows the SMSF loan well.
 
Has anyone recently taken out a loan via their SMSF to borrow and buy property?

Which bank/ lender did you choose & why? Which loan product/ features?

Any experience to share of their process (how smooth it went, how long it took, pitfalls to watch out for, etc)

(we have a SMSF with corporate trustee, just looking to set up the bare trust and select a lender).. thanks

Hi Lawry,

In relation to lenders, La Trobe has killed the market since November 2013 when they introduced their SMSF Product. Majority of our loans went to them, however recently they have changed their loan offering which has posed a challenge or two.

With La Trobe its 5.6% and NAB is 5.88% (pls check). NAB is good however legal fees add up at approx $2100 however they are robust.

La Trobe is non-conforming but no offset but quick settlement and great client service is a positive. I'm a fan I must say.

St George has offset which is good, however client experience has not been great with them - we have had a few settle late which can be quite stressful for the member however everyone is different and will depend on time you need for settlement.

There is a new entrant into the market which we are working with at the moment on their pilot SMSF product with a lower rate than La Trobe at the moment.

Re Bare Trusts, this is specialised and seek advice, depending on your state, your bare trust will need to be executed before you sign the contract of sale (i.e QLD, SA) and just as important is the name on the contract of sale. Implications for non compliance can be a disaster for those who are unaware of the rules and regs.

Important to seek advice before you sign a contract of sale. We have legal guidance on the name to be used on the contract of sale which I am happy to share with you privately. This is a stamp duty issue and may impact finance (a good lawyer will pick it up).

Ensure you have a corporate trustee for your bare trust also - great that you have a corporate trustee for your SMSF.

Remember you can obtain a related party loan or 3rd party finance depending on your personal situation. Again seek advice on related party loans.

Lastly, please do a upfront valuation for the property, if the independent valuer does not value at contract price your up for the difference from the sMSF balance (i.e cash buffer please)

Hope that helps!!
Cheers Ivan
 
In the battle of cheaper rate vs offset in an SMSF - my money would be on the offset.

Re settlement - thats the responsibility of the broker or banker (not the client or the bank or the solicitor) to ensure settlement is achieved.
 
STG are a leader in this market IMHO, the rate difference isn't huge for the flexibility that the offset brings.

Painful to deal with, but sufficient contract time will see you through it even with the expected challenges they may present with turnarounds.
 
I used a lender with offset, and set up as IO

I avoid P&I as I know the principle portion into the loan, I will not get this out under current legislation unless property is sold.

Most property would achieve a CF+ve after putting down 20% minimum required deposit. Any surplus (rent minus mortgage minus expense) should go into the offset, rather than principle.

Justthrowing the question out there:
If we can't extract the equity from the property increase then there is very little need/use to get the house revalued, right?
 
AMP is a pain in the butt with their requirement of paper work and financial/legal advise, but I think other Lender share same pain.

Current variable 6.0%, but fixed 2/3yrs is 5.64%
Note if you fixed rate, you cannot use the offset feature unfortunately.
 
Retire rich assets are required to be carried at market value in the accounts of the SMSf so you will likely need to get a valuation done every couple of years for this purpose
 
Retire rich assets are required to be carried at market value in the accounts of the SMSf so you will likely need to get a valuation done every couple of years for this purpose

I think the requirement now is for SMSF assets to be valued yearly.
 
I think the requirement now is for SMSF assets to be valued yearly.

By what measure is the question. For instance, it is not required for a property to receive a independent valuation each year and valuation can be verified by a rates notice unless there is evidence to suggest a material impact on valuation of the asset. Commercial judgement can be applied as long as the valuation can be verified https://www.ato.gov.au/Super/Self-m...tion-guidelines-for-self-managed-super-funds/

Hope that helps

Cheers, Ivan
 
From an auditors point of view, I prefer to see the St Georges loan documents then some of the others. They given me a better level of comfort, that the fund complies the SIS Act.
 
From an auditors point of view, I prefer to see the St Georges loan documents then some of the others. They given me a better level of comfort, that the fund complies the SIS Act.

Interesting comment PH. Could you elaborate more?

Are some of the other loan documents not up to scratch?
 
valuation can be verified by a rates notice unless there is evidence to suggest a material impact on valuation of the asset. https://www.ato.gov.au/Super/Self-m...tion-guidelines-for-self-managed-super-funds/

The rates notice is the last thing I would accept as proof of a valuation. Some councils are ok some are way off and I am not going to work out which council I can trust. If the trustee wanted to use the rates notice as a bases I would preference them to go to say http://house.ksou.cn/ and pick 3 comparatives. It would give a better result.
 
Interesting comment PH. Could you elaborate more?

Are some of the other loan documents not up to scratch?

Some are questionable and boarder line, especially from some of the second tier banks.

The St George/Westpac ones are very clear and I can see how they comply.

NAB is not to bad but I did have an issue the other day where they appear to have not confirmed that a bare trust existed. We did in the end find a bare trust deed but I do not believe NAB had it.
 
From an auditors point of view, I prefer to see the St Georges loan documents then some of the others. They given me a better level of comfort, that the fund complies the SIS Act.

Hi PH:
Why is that mate? Most of the bank use leading lawyers including Gadens.
NAB uses internal lawyers who are stubborn *******s, but we outsmart the,
Westpac has a panel of 12 lawyers
ANZ & CBA don't do much with them
BOQ Gadens
La Trobe use Vernons and Purcels
BOM use a adelaide mob

Most if all have leading lawyers reviewing the loan docs, from an audit perspective you would want the SMSF set up before date of contract of sale, correct name on contract of sale, bare trust docs correct and SMSF Trust Deed to have borrowing powers and be up to date (anything beofre 2010 is outdated and should be updated). Then deposit should be paid out of SMSF and then review lease agreement to ensure arms length and not a related party.....then review single acquirable asset principle and repairs v improvements.....not exhaustive but a list that I use as a SMSF administrator and auditor.

From an audit perspective, I don't usually have an issue with the mortgage docs, more the rest of the list discussed above.

Cheers, Ivan
 
Top