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Discussion in 'Property Finance' started by CosmicTrevor, 20th Oct, 2015.

  1. CosmicTrevor

    CosmicTrevor Well-Known Member

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  2. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    This one Trevor?:

    Inquiry Recommendation 8 — Direct borrowing by superannuation funds

    Remove the exception to the general prohibition on direct borrowing for limited recourse borrowing arrangements by superannuation funds.

    The Government does not agree with the Inquiry's recommendation to prohibit limited recourse borrowing arrangements by superannuation funds.

    While the Government notes that there are anecdotal concerns about limited recourse borrowing arrangements, at this time the Government does not consider the data sufficient to justify significant policy intervention.

    The Government will however commission the Council of Financial Regulators and the Australian Taxation Office (ATO) to monitor leverage and risk in the superannuation system and report back to Government after three years.

    This timing allows recent improvements in ATO data collection to wash through the system. The agencies' analysis will be used to inform any consideration of whether changes to the borrowing regulations might be appropriate.
     
  3. CosmicTrevor

    CosmicTrevor Well-Known Member

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    Yep

    Clap Clap
     
  4. Redwood

    Redwood Well-Known Member

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    good news for all Trev - but not clear sailing yet- another review in 3 years and for instance if Labor comes in they may have a different view. Overall its a tiny piece of the $1.8 trillion super pie which the ATO stats show so I am not sure what sort of data will be needed to implement a ban. The biggest risk is spruikers and Park Trent got away with a slap yesterday after a 2 year investigation.

    The biggest challenge for the SMSF sector now is APRA's crackdown, not many lenders left that will do 80% LVR on off the plan - property < 80%, and many lenders existing the market. SMSF loans have become a niche.

    I have stated the whole time SMSF Loans are here to stay and nothing will change that view in my opinion. They will always be lenders offering the product.

    Cheers, Ivan
     
  5. Propertunity

    Propertunity Exclusive Real Estate Buyers Agent Business Member

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    At least this gives some certainty to those clients of ours for whom we are currently sourcing property suitable for their SMSF’s (especially so when they already have share investments and want to rebalance their SMSF portfolios with exposure to capital growth and rental income from property).
     
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  6. tizey

    tizey New Member

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    It would be nice if there was a bank that would offer 70/80% LVR with <5% rate on residential within a SMSF.

    Is there a bank that will still do this? Every bank I've spoken with wont budge from their official standard variable - no discretionary discounting in a super fund.
     
  7. Redwood

    Redwood Well-Known Member

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    Tizey - no discretionary discounting in SMSF Loans.

    A SMSF is a special kind of loan and has a number of requirements that a standard home loan or investment loan or Trust loan do not require and as a result - there is a premium on the rate.

    Reasons are:
    1. Loan documents must be compliant with Superannuation Legislation including Limited Recourse, Guarantor, legal assessment of contract and type of property consistent with SIS (further relates party provisions are assessed)
    2. External Lawyers review the SMSF Trust Deeds and Bare Trust - your broker/ bank presenting the deal for you needs to understand these docs otherwise this can be a nightmare and costs can pile up and the bank will be smiling with the overrun. Ensure your bare trust is done right first time.
    3. A SMSF is a Trust with either individual or corporate trustees

    The cheapest rate I know of is 5.12% @ 80% - I have had clients try to get discounts - no chance.

    Servicing is becoming stricter and only a couple of lenders will now do off the plan so there is no real certainly for off the plan settling in 2 years. For any off the plan purchases I would want a client to budget for 60% LVR in 2 years time as a safety net, however I think 70% is safe.

    We wrote an article on the topic which I will share (mods be free to delete if its a breach)
    https://redwoodadvisory.com.au/good-news-for-smsf-loans/

    Hope that helps

    Cheers Ivan
     
  8. Paul@PFI

    Paul@PFI Tax Accounting + SMSF Business Member

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    I would think the bank policy changes to up LVRs and cash requirements and limits to lending to all borrowers incl SMSFs and the withdrawal of some SMSF lenders indicates market forces are self serving and Treasury didn't have to step in.

    The LVR issue is really not about a number. The best LVR in a SMSF involving property is where cashflows are positive without using contributions. You don't want rental losses to consume the contributions as the fund will just go nowhere. Good cashflow properties + LVR's that avoid this problem are always the answer.

    I'm finding the strategy choice of many trustees (no guidance) seems to be a loan with a offset rather than hold $ in a savings account so contributions build and are offset at a 5%+ rate saving. That's not shabby.
     
  9. CosmicTrevor

    CosmicTrevor Well-Known Member

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    Agreed on all points and still clapping. I've got one settling soon, at least the government hasn't upset the apple cart. LVR 70%/80% doesn't bother me, the additional equity I'll have to tip in doesn't really get in the way of plans.
     
  10. Rolf Latham

    Rolf Latham Inciteful (sic) Staff Member Business Plus Member

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  11. euro73

    euro73 Well-Known Member Business Member

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    AMP's re-entry

    The maximum LVR allowed for AMP SuperEdge Loans is 70%

    · Properties established for less than 6 months (including Off the Plan properties) can no longer be provided as acceptable securities

    · The following are additional requirements to obtaining an AMP SuperEdge Loan:
    ü The SMSF must have a minimum pre-purchase net asset position of $200,000 (prior to any expenses incurred in relation to the proposed property purchase). The following documents are required as evidence of the net asset position:
    § The most recent tax return/balance sheet statement for existing SMSFs (must be dated within the last 12 months)
    § A Statement of Funds for new SMSFs
    § Bank statements confirming outstanding balances of all the SMSF’s liabilities
    § A valuation report of the asset dated within the last 12 months is required if the asset type is categorised as ‘Other’ (e.g. Artwork)
    ü The SMSF must pass a liquidity test. The SMSF must hold liquid assets (cash, shares, government bonds, term deposits) amounting to a minimum of 10% of the total SMSF assets after settlement.
     
  12. euro73

    euro73 Well-Known Member Business Member

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    Offset is certainly the preferred option, but there aren't too many lenders left where Offsets are available. Even fewer where offsets are available AND they will take new dwellings.
     
  13. Redwood

    Redwood Well-Known Member

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    Hi Euro - there is one lender that does 80%, includes off the plan and new dwellings and has offset account and a favourable rate...non-bank lender. We have been using them alot.

    St George/ BOM is the other however as discussed in the other threads they require 10% liquidity and limit LVR to 70%.

    Cheers Ivan
     
  14. retire@45

    retire@45 Active Member

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    Are you able to share which lender this is if possible? We where waiting on AMP to come back in but would prefer 80% with offset if possible.

    Thanks
     
  15. Marty McDonald

    Marty McDonald Mortgage broker Business Member

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    You didn't get the hint? You have to contact Ivan ;)
     
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  16. retire@45

    retire@45 Active Member

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    Can't hurt to ask can it :)
     
  17. CosmicTrevor

    CosmicTrevor Well-Known Member

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    I think it is Big Sky building society
     
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  18. retire@45

    retire@45 Active Member

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    Thank you much appreciated
     
  19. euro73

    euro73 Well-Known Member Business Member

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    The maximum LVR allowed for AMP SuperEdge Loans is 70%

    · Properties established for less than 6 months (including Off the Plan properties) can no longer be provided as acceptable securities

    · The following are additional requirements to obtaining an AMP SuperEdge Loan:
    ü The SMSF must have a minimum pre-purchase net asset position of $200,000 (prior to any expenses incurred in relation to the proposed property purchase). The following documents are required as evidence of the net asset position:
    § The most recent tax return/balance sheet statement for existing SMSFs (must be dated within the last 12 months)
    § A Statement of Funds for new SMSFs
    § Bank statements confirming outstanding balances of all the SMSF’s liabilities
    § A valuation report of the asset dated within the last 12 months is required if the asset type is categorised as ‘Other’ (e.g. Artwork)
    ü The SMSF must pass a liquidity test. The SMSF must hold liquid assets (cash, shares, government bonds, term deposits) amounting to a minimum of 10% of the total SMSF assets after settlement.
     
  20. euro73

    euro73 Well-Known Member Business Member

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    SMSF LRIL