SMSF Loan Serviceability

Our SMSF is tracking well and has funds available for another property , either a cheapie outright , or as a deposit for something more expensive .

Personally , we're over the serviceability limits , though we're in the process of trying to change that .

Are there lenders who look at the serviceability of the SMSF in isolation to your personal serviceability ?
@Marty McDonald , @Rolf Latham , @Jamie Moore , @Terry_w

Cliff

 

SMSF loans are always based on the known cashflows of the fund since a SMSF can only rely on its current sources of income eg contributions from employers (concessional), positive geared property income, other investment income and each lender has its basis for counting this. Non-concessional contributions generally need a proven past history to be counted and get messy where they need to be relied on.

The cash surplus liquidity requirement tends to also pose a issue for many funds.

SMSF loans are often better addressed with a broker who is familiar with the product and its continued changes in the past year or so.

 

Is your question on the SMSF side or the personal A&L side?

The remaining SMSF lenders will not do a servicing on your personal situation unless you need to use additional superannuation contribution for servicing purposes (assuming the current superannuation contributions are not enough for servicing within the SMSF).

If your question relates to the personal side of things then yes some lenders will factor the SMSF debt into servicing - lenders such as CBA and NAB.

As a side note - if some of your existing properties under company names and these entities are able to meet their liability obligations then some lenders will exclude this from your personal A&L position.

 

what they ^^^^ said.

Need to ensure the new SMSF debt is self supporting in their calc with the new rent + your other SMSF debts + other SMSF incomes + 9.5% super contributions. That way you don't need to bring the excess personal contributions or personal A&L into it.

 

Finance is for the super and we would be aiming to provide the deposit and ongoing finance from within the Super , and not including any super contributions in the serviceability calculations .

We currently have three properties owned outright within the super and a forth property with a loan ( P& I ) , however this has an offset and currently the money within the offset is equivalent to the loan . We would be using the funds in the offset for the deposit . ( around 350 K )

Our fund is in transition to retirement and we have drawn funds out over the last two years , but don't plan on doing this next year .

We're not looking at buying something now , but are doing our DD with a view to buying a NDIS property in 2-3 years time .

We had a situation where NAB pulled finance for a loan around 3 years ago , when they included our borrowing within the super in their serviceability calculations , despite earlier indication that it wouldn't be the case

Cliff

 

A fund with a LRBF and paying pensions may have issues with servicing calcs. Makes it harder to get loan approval. Think of it this way. The minimum pension is 4% and this will increase with age. If the fund is paying out 4% of most (or all its income) from fund capital it needs a source of inflow to limit cashflow bleed which will consume the fund cash perhaps even down to $0 within a period of time. Given that yields are typically around 4% before ownership costs are a factor this can indicate a cashflow bleed. It gets far greater focus by lenders than a few years back. The reason is that the fund may have no plan B and could be in default of the loan if it exhausts cash with no capacity to rollover or receive contributions. Some funds try to argue they could add adult kids later but lenders will usually only consider present members. Hence many lenders will see this as a concern. Add LRBF interest into the calcs and the fund may have a liquidity drain that concerns a lender.

Cashflow projections will assist any such LRBF application.

And without a plan to add liquidity the fund may experience cashflow / liquidity risks if any one property experienced an event that sees rents stop eg tenancy issue, damage etc. Many lenders will allow only a portion of expected rental income in their servicing calcs.

Many lenders have issues with retirement phase LRBFs and see them more as a product for accumulation phase members.

 

Commercial or Residential? What LVR? Many of the lenders in this space service inside SMSF only. The personal guarantee for the LRBA generally doesn't affect servicing in personal names but not always the case, as you found out.

This is a bit dated and a few left the space completely. With LRBA no longer on the chopping block, smaller players have entered the market.

 

What is the strategy behind a NDIS property please?

 

cash flow

Cliff

 

Westpac Private Banking still do SMSF loans too

 

Mortgage EZY has a very good product worth looking into

 

seems to be early days at this stage .

Cliff