SMSF's will no longer be able to borrow to invest in property?

Discussion in 'Superannuation, SMSF & Personal Insurance' started by Propertunity, 13th Jul, 2018.

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  1. Propertunity

    Propertunity Well-Known Member

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    I received a an email from a property services company today saying:

    If you have ever contemplated using your super to invest in residential property with borrowings, you must work out if its appropriate and advisable to do so now as your window of opportunity is closing.

    A major lender in this space, St George/Bank of Melbourne announced today that it will no longer offer SMSF loans. It follows NAB's exit a few years ago. With increased pressure on banks to tighten credit policies, there are now only a handful of lenders that offer SMSF loans.

    To add to this, a number of recommendations (such as the Murray Inquiry) have been made to the government to remove the laws allowing SMSF's to borrow. Plus the Shorten government has said that it will ban SMSF from borrowing if they win the election.

    AMP is now the only lender in Australia that provides SMSF loans that also have an offset account attached. An offset account is very advantageous because it allows investors to park cash against the loan to reduce interest costs but still gives them access to that cash for future investments (e.g. into shares to diversify a SMSF's investments).


    Is there any truth to the above or is this a marketing exercise in an attempt to generate new business?
     
  2. Rolf Latham

    Rolf Latham Inciteful (sic) Staff Member Business Plus Member

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    SMSF lending is alive and well.............. this week

    its not that much different from general financial stuff, lots of change.

    and while some elements would like to sideline brokers, the more flux in lending and the more noise from the RC etc, the more consumers will seek out whom THEY trust..........

    ta

    rolf


    ta
    rolf
     
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  3. ttn

    ttn Well-Known Member

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    Would a person borrows from a FI and lends to their SMSF is as good as?
     
  4. Paul@PAS

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

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    That property company should not be sending those emails. SMSF loans are a financial product and a license is needed. ASIC would rip them a new one.

    I call bullship on the AMP being the only lender with offset. A blatant lie. And thats credit advice.

    And at least 80 more loan products on Canstar without an offset. Given that the tax benefit of a offset is at 15% its no major issue. Offsets in a SMSF are so different to those for general investors.

    There's someone to add to the spam list ?
     
    Last edited: 13th Jul, 2018
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  5. Paul@PAS

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

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    Whaaaaat ?
     
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  6. ttn

    ttn Well-Known Member

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    Dr Google says that one can borrow personally and on-lending to the SMSF :D
     
  7. Ross Forrester

    Ross Forrester Well-Known Member

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    I think the sender of the email is simply trying to create scarcity to drum up business.
     
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  8. Shahin_Afarin

    Shahin_Afarin Residential and Commercial Broker Business Member

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    Its actually correct - effective today both Westpac and St George have pulled out of commercial and residential lending. Also extension of IO terms for existing SMSF loans have been banned.
     
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  9. Terry_w

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

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    Removal of Self-Managed Super Fund (SMSF) Home Loans

    We continually review our products to ensure they meet the expectations and requirements of our customers. In order to streamline our product offering, we have decided to withdraw the Self-Managed Super Fund Home Loan product from sale, effective Tuesday 31 July 2018.

    In addition, we are withdrawing from sale Business Lending to SMSFs for residential or commercial securities, effective Tuesday 31 July 2018.

    (above from St G and a similar one from Westpac - just now)
     
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  10. Terry_w

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

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    Yes you can do this. Many issues to consider though.
     
  11. euro73

    euro73 Well-Known Member Business Member

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    Its bang on. Brokers across the country will have their inbox's dinging about right now with the news that STG and WBC are withdrawing their SMSF product from July 31, 2018

    Its also true that AMP is now the only player with an offset... but they dont allow new dwellings... but will do them by exception for very strong applicants

    Macquarie allows new dwellings but doesnt have an offset

    Its getting difficult to find SMSF resi loan options that dont stink ....
     
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  12. abbyfresh

    abbyfresh Well-Known Member

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    Their assessment must be concluding that these loans are and will continue to be less profitable for the banks and increasingly higher risk.
     
  13. JohnPropChat

    JohnPropChat Well-Known Member

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    I can understand issues from compliance point of view but fail to see how SMSF loans with sub 80% LVRs and interest rates at 6+% are high risk and less profitable?
     
  14. JohnPropChat

    JohnPropChat Well-Known Member

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    Tax benefits of offset account could only be 15% but ability to use the offset as "cash class" investment like savings accounts, term deposits makes it desirable.
     
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  15. Brady

    Brady Well-Known Member

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    Wonder what AMP will do once it knows it has a niche without many others playing in the space.....

    1. pull out
    2. continue
    3. take a whole heap of market share and then pull out along with jacking up rates?
     
  16. euro73

    euro73 Well-Known Member Business Member

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    Not at 70% LVR and rates of over 6%. These loans are incredibly profitable. This is a royal commission reaction I suspect
     
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  17. Shahin_Afarin

    Shahin_Afarin Residential and Commercial Broker Business Member

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    Its an interesting decision - why pull out of SMSF lending now? Is there any correlation between the RC and SMSF lending?

    I highly doubt it was unprofitable even 3/4 years ago when LVR's were 80%, liquidity terms didn't exist and rates were marginally higher than normal residential lending.

    This decision will be far from killing the market but slowly and surely these little changes have already created a massive change in the market - batten down the hatches folks.
     
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  18. euro73

    euro73 Well-Known Member Business Member

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    I call ******** on that. Canstar says

    BankSA, STG , BOM nd Westpac ofer SMSF with Offset - all gone on July 31

    They also say AMP

    They also say Reduce Home Loans offers a product- but its a mortgage manager so I dont know how that works...

    The value of an offset in super isn’t its offsetting function - but it’s redraw function .
     
    Last edited: 13th Jul, 2018
  19. Redwood

    Redwood Well-Known Member

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    Big sky has an offset....

    Cheers Ivan
     
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  20. euro73

    euro73 Well-Known Member Business Member

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    cool..so we have 2 lenders , maybe 3 with offsets. Not a lot of choice. With the entire Westpac extended family ( BoM, BSA,STG) pulling out ...6 becomes 3 on July 31.

    Big Sky is also on very few panels. Difficult to access for most brokers
     
  21. Rolf Latham

    Rolf Latham Inciteful (sic) Staff Member Business Plus Member

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    As I said earlier - SMSF lending is alive and well - was always going to be nichey.

    and a compliant loan doesnt have redraw.......... i think

    which is why the mortgage managers call these things redraw offset - because its a linked sub account. Not being an ADI calling it an offset proper is an issue I suspect. but this does comply for SMSF loans?, since the loan Principal isnt actually reduced. has other " borrower comfort issues" but these are separate things

    Please see specific advice.


    ta
    rolf
     

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