An SMSF can borrow to invest in a variety of investments such as properties or shares. Banks and lenders have tailored lending products for SMSFs. The structure of your SMSF and the type of investment (commercial or residential properties) determines the loan to valuation ratios, typically ranging from a maximum of 65 –80%.
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. For more information on loans in super, please visit our SMSF loans page here.
Yes – SMSF loans can be refinanced just like any other home loans, allowing the Fund to switch to a more affordable deal. Regularly reviewing the loan arrangements might help saving money and continue building a secure finance future for your SMSF.
SMSF loans normally come with a wide range of terms and conditions. Therefore, Trustees of the SMSFs should make sure they are familiar with these conditions before making the refinance decision. The Deed of the Custodian Trust might also need to be updated in order to reflect the new lender.
When refinance the loans in the SMSF, be mindful of the ATO regulations. Refinancing the loan must not increase the amount the Fund is borrowing against the property. It is also important to note that the loan cannot be used to ‘improve’ the acquirable asset.
The ATO has set out its views on refinancing an SMSF borrowing. More details on this, see here.