Banks and lenders have lending products for investment in residential and commercial property purchased in SMSFs. The structure of your SMSF and the type of investment (commercial or residential) determines the loan to value ratios which apply, typically ranging from a maximum of 65 –80%.
Is there a difference between a home loan and an SMSF loan?
There are a couple of key differences between a home loan and an SMSF loan. The first obvious difference is cost. SMSF loans are often viewed by lenders as commercial loans and therefore commercial loan costs apply.
Apart from establishment fees (see pricing below), the variable interest rate for an SMSF residential property loan is often about 100 basis points more than a discounted variable rate home loan. At the time of writing an SMSF property loan is approximately 5.70% whilst a home loan is 4.70%.
Another key difference is you cannot redraw against an SMSF property whereas most home loans enable you to redraw unused equity up to the loan to value caps offered by lenders.
Do all banks and lenders offer SMSF loans?
The short answer to this question is “no”. SMSF loans are a lending niche and not all lenders offer these solutions. Further, some lenders have more appetite (and expertise) for certain deals than others. There are often strict rules imposed by lenders on SMSFs regarding availability of funds after the investment has been made in addition to the requirement for the trustee to seek financial advice regarding borrowing in the SMSF. Some lenders who offer SMSF loans lack processing capability to ensure the deal runs in a timely manner which can result in additional fees and penalties due to the stringent regulations with regard to superannuation.