Refinancing to SMSF Loan with Westpac (no offset)

Hi,

I am thinking of refinancing my st george smsf loan IO (7.07%) to Westpac smsf PI (5.79%).
There is no offset with Westpac which I don't think important for smsf.

As my plan is to pay off this loan, then buy another property when enough deposit/redraw.
Also changing to PI to pay it down quicker.

What do you guys think?

Pro:
Lower PI rate (with STG PI is 6.53%)

Cons:
No offset
one off fees to refinance $2400 (establishment and solicitor fees)

 

I think the offset account for a SMSF is important. I like the flexibility and the ability to earn a higher interest rate on your cash.

Also once loans are paid down they cannot be redrawn.

Where are you going to put rents and employer contributions?

To answer your question you would need a deep dive into your personal position.

 

Just to get my understanding right.
If I keep putting all rents and contributions to the offset, I can withdraw these funds from offset to buy next investment property/shares.
But with non-offset loan, we can't redraw the funds?

 

A SMSF cannot use a redraw facility to buy a new asset.

However

Money borrowed under an LRBA may be applied not only in acquiring a single acquirable asset but also in carrying out repairs and maintenance to that asset whether necessary at the time of its acquisition or at a later time.

SMSFR 2012/1 p 14

 

You won be breaking the law.
Superfund's can only borrow to acquire an asset.

This is why an offset account is particularly important with a smsf

 

It really gives me a headache to see these rates - the banks are taking us for a ride. You can get a cheaper rate with non banks than the above and CBA will also be cheaper.

The offset argument is interesting and with over 1% loading this really makes you scratch your head as to whether its worth it. For instance, someone who is 50, I want them paying down the loan ASAP, whereas someone who is 30 may not want it to pay down. As i say depends on your strategy.

Some banks still do interest only and you can consider a fixed rate which is generally favourable in the SMSF world.

Do the sums and weigh it up against your strategy and if it makes sense then go ahead. I personally would not want any clients paying 7+ %.

Cheers

Ivan