Under the Superannuation Industry (Supervision) Act 1993 (Cth), a limited recourse borrowing arrangement loan can be refinanced if certain conditions are met. SMSF loans can be refinanced like any other property loan, so the Fund can get a lower interest rate. By regularly looking at loan arrangements, your SMSF can save money and build a solid financial future.

When you refinance your SMSF loan, here are some things to keep in mind:

1.Terms and Conditions Most SMSF loans have a long list of terms and conditions. So, SMSF trustees should become familiar with these terms before they decide to refinance. The Deed of the Custodian Trust may also need to be changed to account for the new lender. 2. The ATO makes decisions and sets requirements You should know what the ATO wants when refinancing loans in the SMSF. By refinancing the loan, the Fund can’t borrow more money against the property than it already has. Also, the loan can’t be used to “improve” the asset.

Criteria for eligibility:

To refinance an SMSF, you usually have to meet several strict requirements, such as:
  • You can borrow up to 80% of the property’s value (so the entire cost to switch or refinance the loan must be no more than this amount).
  • An SMSF home loan can only be used to buy a regular house in a city or town.
  • After settlement, you should have between 10% and 20% of the property’s value in cash.
  • The new loan can’t be more or less than the old one, and it has to be for 15 to 30 years.
  • The current loan must be more than a year old and have been paid on time for the past six months.

FAQs on SMSF Refinancing

  1. Can I use refinancing to get more equity? Under the Superannuation Industry (Supervision) Act 1993, you can refinance an SMSF loan. Still, you can’t release equity or increase your borrowing amount (SIS Act). It’s important to note that repairs and maintenance to security properties that are needed can sometimes be approved.
  2. How long will it take to change my SMSF loan? It can take four to six weeks to refinance an SMSF loan from application to settlement. This is longer than it takes to refinance a standard loan. This is because SMSF lending is a very specialised type of lending that requires a lot more paperwork than a typical home loan.
Refinancing an SMSF loan is more complex and requires more paperwork than a regular home loan. Refinance Pro can help you get your application approved quickly and easily!
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