SMSF borrowing

How does SMSF borrowing works? Does person borrowing needs to sign personal guarantee? If so, does it reduce borrowing power available in personal capacity ? I would think that since SMSF borrowing is LRBA, it should not reduce personal borrowing capacity.

 

PG's used to be required at some of the bigger brands...but that is now a thing of the past . There arent many lenders for SMSF any longer.... its mainly Liberty, Latrobe and Origin, who each provide money via their own brand directly, or via wholesale funding to mortgage managers.

These days, most lenders ( if not all lenders) will not typically consider LRBA SMSF debt as a personal liability when borrowing in your own name.... However, just to be sure you don't snooker yourself, its better/smarter to exhaust your personal capacity before borrowing via a LRBA....just in case the PG thing becomes a thing again one day

 

I once signed a personal guarantee but it doesn’t influence my personal borrowing capacity. This is because my smsf loan doesn’t go to my file with any credit agency as my loan.
Btw, mortgage house on top of the above listed entities provides smsf loans at present

 

I've heard conflicitng arguments about this. Does it depends which bank/credit union you go with.

As Euro said I'd use all your personal borrowing up before giving it a shot.

 

If I go to my Veda file or a file produced by any credit agency, I do not see a loan of my smsf. Moreover, I do not see and would never see any personal guarantees in such a file because such guaranties represent internal documentation between my lender and I.
Obviously, people who have smsf loans have to declare them when taking home loans. Having my smsf loan, I bought 2 properties and both times I declared that I have a smsf loan and as soon as my lenders got this info, that was fine and no further questions asked about personal guarantees
Btw, if a smsf can buy a property now and has enough funds to complete this transaction, why wait?

 

Yes. As soon as I clarify for the bank that I am a director of aaa pty Ltd and it’s a trustee for my smsf and the property was bought via smsf, that was enough

 

Thanks @euro73, @Rolf Latham and @OzziMelbourne.

 

All lenders will require a personal guarantee, the members will generally require a legal advice certificate. SMSF lending is the best its been since pre election when the big 4 left. Rates are now below 5% which is still high but it is what it is.

Re in your personal capacity as mentioned above you will need an accountants letter re both companies that you are a director of and disclose the smsf assets / debt in the app and some lenders may ask for the annual return for the smsf.

No issue using your smsf to purchase property, as long as you do your due diligence and have someone in the know assisting you with the process.

Hope that helps

Cheers Ivan

 

BTW for all those concerned, Firstmac went back into the smsf lending space today which is good news, fairly good rates and competitive with the best lenders in the space, with these lenders coming back in will really put pressure on La trobe to lift its game.....

Cheers Ivan

 

Very low fees too, but unfortunately no offset account as they arent an ADI. The redraw/offset feature that they are able to offer on retail products wont suit SMSF/SIS Act redraw restrictions... If they can find a way to offer offset, it will be best in market

 

kim isn’t short of coin

 

Just with current SMSF lending environment (under 5% interest is a good tart)
1. SMSF with 350K how much can I borrow up to? assuming around 3% gross yield and history of 40K PA voluntary contribution
2. How long to get approval? I intend to buy at auction should I be asking for at least 90 days settlement
3. How much admin is required and time required to set up appropiate accounts and do these need to be set up before I bid at auction?, I already have a SMSF account which is in Australian shares

 

PG's and personal servicing has been a mixed experience for me, CBA/NAB wants to include it where as Westpac doesn't seem to care.

Good to see this space picking up again, it was dire for a while there.

 

1. High level 400-500k, SMSF borrowing calcs are pretty simple as the only real expense (if no other assets) is the mortgage debt at the assessed rate. The income is just net super contributions + rental income. Given the reliance of rental income, the low yield doesn't help too much here.
2. 90 days is ideal. Longer setts suite SMSF given paperwork/complexities involved.
3. Set up a bank account, you'll need your team to set up the structure to purchase. The property is isolated from other assets to obtain borrowings. Your acc should be able to advise on timings of this.