SMSF Borrowing: with a SMSF you can purchase property by borrowing money. An SMSF loan works just like any other loan your have obtained.
An SMSF loan will allow you to:
- Determine an investment vehicle that meets your individual needs
- Plan your retirement on your own terms
- Leverage your Self Managed Super Fund when borrowing to purchase real estate
Residential and commercial property can be purchased using an SMSF loan. You can ever purchase a holiday home with an SMSF loan. There is one important thing to note when obtaining these loans. They must be used to obtain property for business means from a member or related entity. In regards to residential properties they cannot be obtained through a related member.
SMSF Loans - Need to Know Information
You can rest assured knowing that SMSF loans will take into account your financial situation and future goals to best meet your individual needs and insure things are financially sound.
Terms on SMSF loans will vary such as interest rates, commercial securities and the loan details.
Commonly you will go through this process:
- SMSF will be reviewed or a new one established
- Set up a Property Trust Deed
- Details given to solicitors
- Approval for a loan is obtained
- Each party exchanges contracts with the other
- Granting of loan documents
Is it legal for a SMSF to borrow money?
Borrowing money by a SMSF is restricted and there are certain rules in place if the trust cannot make repayments. A trust must follow these rules to borrow money from an SMSF:
Here are few rules an SMSF must follow be able to borrow money:
- The asset can be normally obtained by a SMSF
- A security trust is used to hold the asset for the SMSF (Security Custodian)
- An interest in the asset is obtained by the SMSF
- Legal tiles can be obtained by the SMSF to make one or more payments.
The following are not permitted when using an SMSF loan:
- Construction loans cannot be given though a SMSF can cover renovation and repairs.
- SMSF loans cannot be refinanced
- It is not permitted to buy property with an SMSF that you live in
- Your SMSF cannot purchase a residential property owned by you or a relative (or a related party).