Should I pay off my SMSF mortgage or invest funds?

Discussion in 'Superannuation, SMSF & Personal Insurance' started by Mark P, 3rd Apr, 2019.

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  1. Mark P

    Mark P New Member

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    Would appreciate some thoughts on this question. We have two properties in SMSF and both have mortgages. Was recently able to contribute some capital into our SMSF due to a private property sale. Our SMSF mortgages are now at 6% and 7% approx respectively and we are weighing up paying down the a percentage of the loans or investing the capital in managed funds. Retirement is probably about 2 years away. Any input on the best approach?
     
    Mark P, 3rd Apr, 2019
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  2. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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    You would need to be licensed to answer this so all I will say is that when a SMSF loan is paid down the money cannot be redrawn or the property used for further borrowings. Doesn't the loan have an offset account?
     
    Terry_w, 3rd Apr, 2019
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  3. Peter_Tersteeg

    Peter_Tersteeg Mortgage Broker Business Member

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    There could be a lot going on in your SMSF that might need specific and tailored advice. This isn't really something you can ask for general info on.

    In my own case I've taken a path that ensures my SMSF is self sustaining. The fund doesn't need members super contributions to run. This way if the members aren't working and making contributions, the SMSF will still be solvent of the rental income and other ongoing income the fund generates.

    Doing this has required some debt management.
     
    Peter_Tersteeg, 3rd Apr, 2019
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  4. Paul@PAS

    Paul@PAS Tax, Accounting + SMSF + All things Property Tax Business Plus Member

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    Maintaining a mortgage on funds assets may limit the pensions that the fund can pay assuming age 60 is approaching. The whole issue of pre-retirement planning etc needs to be considered more broadly and this likely requires some licensed financial strategy and advice that considers a range of matters
     
    Paul@PAS, 3rd Apr, 2019
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  5. Redwood

    Redwood Well-Known Member

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    A politician answer - it depends.

    Do you want to buy another property - if yes by paying down a mortgage there will be no ability to drawdown.

    Generally speaking - a consideration can be a "related party" loan to avoid the ridiculous rates on SMSF loans.

    Re what to do with the $$$ that will be financial advice.

    Cheers Ivan
     
    Redwood, 3rd Apr, 2019
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  6. Illusivedreams

    Illusivedreams Well-Known Member

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    7% mortgage rate seems a bit high to me. We are in the 5.X%

    Are their better options?
     
    Illusivedreams, 3rd Apr, 2019
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  7. Redwood

    Redwood Well-Known Member

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    Lenders such as St George, BOM have interest rates up to 7.5% - as they have withdrawn from the market. You will need to refi to achieve a better rate, refi can be to another lender which will have say $3k in costs - apps, legals and valuation or use a clever strategy and use a related party loan.

    Important to seek advice being implementing a related party loan.

    Cheers Ivan
     
    Redwood, 3rd Apr, 2019
    #7
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