SMSF loans
If you’re considering taking out a home loan to buy property as part of your self-managed super fund (SMSF), you can learn about some of the options with Canstar.
What is a self-managed super fund (SMSF) loan?
A self-managed super fund (SMSF) loan is a home loan used by an SMSF to buy an investment property. Any returns on the investment – whether that’s rental income or capital gains – are funnelled back into the super fund to help increase the fund’s retirement savings.
The federal government’s Moneysmart website says a property cannot be acquired from, lived in or rented out to a fund member or any of their related parties.
One exception is if the property is a commercial premise in which case it can be leased to a fund member for their business but it must be at the market rate.
Investing in property within an SMSF must be in the best interests of fund members and in accordance with the laws around SMSF borrowing.
How does an SMSF loan work?
There are strict rules that apply to an SMSF borrowing money for property and not all banks or lenders offer such a service, so your choice may be limited compared to someone buying a home to live in or an investment property outside of an SMSF.
Moneysmart says you may find that SMSF property loans tend to be more costly than other property loans. You also need to be mindful of any fees and charges involved with the purchase of any property, which it says could reduce any amount earned going to your SMSF.
There may also be tax implications on any earnings from the property, either from rent or sale of the property, so you may be wise to seek some independent professional advice before making any decision.
Moneysmart adds that anyone who gives advice on an SMSF must have an Australian financial services (AFS) licence.
However, in terms of the features and mechanics of the product, SMSF loans are similar in many respects to conventional home loans. For example, they can come with a fixed or variable interest rate, a loan term that’s typically 30 years, and in some cases the option to make interest-only repayments for part of the loan term.
You can use Canstar’s comparison table above to check out what rates, features and fees are available from some SMSF loan providers.
Important information
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This advice is general and has not taken into account your objectives, financial situation or needs. Consider whether this advice is right for you.