For those who are unaware, a “Self-Managed Superannuation Fund,” (SMSF), is an annuity fund generated for up to 4 people with the objective of offering benefits at retirement or upon an early death or disability and the capital is looked after by the Trustees, whom are also members.
More and more Australians are now making the choice to take control and become more involved in their personal superannuation.
Qualifications for a SMSF Property Loan
- The number one reason why people choose to take care of their own annuity is down to the adaptability provided in selecting where their money will go to be invested.
- Laws regarding superannuation allows SMSFs to obtain money to help in purchasing residential investment property, which offers forthright exposure to real property services.
- Australian citizens with current SMSF loans or currently in the process of founding a SMSF.
- SMSF’s that already have a residential property loan and wish to refinance from another lender.
- If you currently have a SMSF facility set up, it can now acquire funds to buy a residential, retail, commercial, rural or specialised property via a SMFS Loan facility.
Basically, it has to follow a structure such as:
- A Security Trustee will purchase the property on behalf of the SMSF and then become the legal owner of the property and keep it in the trust for the SMSF (as beneficial owner).
- Skilled superannuation lawyers are always the best bet for those without the experience in these matters
- The SMSF will provide an equity offering from the Superannuation Fund’s assets and get the balance of the money with an SMSF loan.
How does it Work?
- A Lender will provide the loan facility to the SMSF, to assist in the purchasing or procurement of suitable income producing real property
- The resource is held in a trust of which the SMSF holds a beneficial interest in.
- The finances, which have been borrowed (SMSF Loan) are then applied to the purchasing of an asset.
- The SMSF loan is a “limited recourse”, which means that the lender is not able to touch any other SMSF assets apart from any property held as security, which generally means that the rights counter to the SMSF in the case of default are only limited to the security property.
- Cash reserves to fulfil – the SMSF construct must have enough cash or equity, to cover the required deposit, acquisition and settlement costs.
Everyone knows that home-ownership will lead to a better life and is seen as a symbol of success and security. And although being a house owner is something that is enjoyed by many Australians, the increase in the cost of housing when being compared to the average salary is making it more difficult for many to have their very own home.
Purchasing property by way of your SMSF can definitely help you take a step closer to that wonderful dream.