What To Know About Self Managed Super Fund Loan Interest Rates
From past years the rules governing self managed super fund loan interest rates have been changed so that you can use your super funds to borrow to invest in an asset, like a property. If you wanted to purchase a property, your fund had to buy it outright. But now you have the chance to borrow anywhere from 60-75% of the property value that depends on the type of lender and property.
So if you are considering a self-managed super fund loan, this can be a great way to leverage super to expand your assets and gain some compelling tax advantages.
What type of property can be purchased?
You can borrow to buy property like commercial, rural, retail, holiday apartments and residential through your fund.
Advantages of Borrowing For Property Through your SMSF
- The capability to leverage an asset
- Tax benefits and savings
- It provides you diversification of investment from managed funds or shares
- Also, you can gain 10%capital if you hold the property for more than 12 months and potentially nil if the property has been sold out when the fund is in the payment phase
- Tax-deductible interest costs the lender or bank has no access to the other assets in your self managed super funds.
- However, the rent generated from the property is not counted as a taxed contribution.
Can you borrow to fund property?
The followings are the things you need to consider
- Do you have the capacity and cash flow to service the loan? The bank will value the property and determine whether the rental income and any extra super contributions you make can cover the loan. It also depends on whether you purchase residential property or commercial property, particularly when the interest rate increases.
- Does your self managed super funds allow you this sort of borrowing? You need to ensure that trust deeds permit it, and you may need to provide provisions for it to do so.
- Does it go with my investment strategy? In this situation, a discussion with your investment adviser would be crucial.
- Can I cover the extra cost? Your self managed super funds are responsible for rates, land tax, interest and loan repayments, legal and accounting fees, insurances, repairs, property management costs etc.
The self managed super fund loan interest rates are tailored to provide loans to the trustee of authorized, regulated Australian self-managed super funds to borrow to buy a property. However, borrowing a self-managed super fund loan is complex.