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SMSF Loan Refinance – Star Blue

Less documentation, fast approval, 70% LVR

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    Have your documents ready? Enjoy fast approval with our self managed super fund home loan, Star Blue SMSF process. It’s quick and easy, with less paperwork. You can have your approval ready within 3 days. Plus, you can bundle and save* on your home loan – simply, bring over your existing owner occupied home loan to us.

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    Ready to get started?

    Answer the following questions with a “yes“, and you may be eligible for a super-quick Easy Refinance home loan approval!

    P.S. Don’t worry! If you don’t meet these requirements, you can still refinance with us…it just means that it might take a bit longer.

    • If you have a current self-managed super fun (SMSF) loan, is it more than 12 months old?
    • Are we offering a better interest rate than you have now?
    • Is the LVR under 70%?

    If you can meet these requirements, contact us below using the form. And if you’re feeling unsure, that’s okay – fill in the form, and we will still reach out and have someone call you and guide you step-by-step through the process.

    Apply now

    Refinance an SMSF loan

    The use of an SMSF loan can aid the majority of those with a self-managed super fund. Making use of SMSF loans can be an incredibly smart way to invest in property, in turn diversifying your overall portfolio and wealth.

    With this being said, SMSF loans carry different interest rates than a standard home loan – understanding how SMSF loan refinancing works is crucial in ensuring that these interest rates do not quickly accumulate and impede the performance and growth of your retirement fund.

    That’s why we’ve put together a comprehensive guide to help investors understand the nuances behind refinancing an SMSF loan, including why they might want to refinance and what to look out for. 
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    What is an SMSF (self-managed super fund) loan?

    A self-managed super fund loan is a form of investment loan where your SMSF can utilise its funds as a deposit, and borrow the remaining amount to fund the purchase of an investment property that would have otherwise been out of reach financially.

    They do, however, have strict requirements that must be adhered to under superannuation law and normally require the establishment of a separate trust to hold the property. To take out an SMSF loan, you might need to engage with a legal professional experienced in SMSF lending to help set up the required structure for an SMSF loan and ensure that any loan will meet superannuation law requirements. 

    The structure of an SMSF loan is fairly unique, as it operates through what’s known as a limited-resource borrowing arrangement (LBRA). Since your loan is technically taken out by the SMSF with you as the trustee, an LBRA is put in place to protect their assets in the case that you are unable to make consistent loan repayments. This way, the SMSF and its assets cannot act as collateral for your investment.

    This is the main reason why refinancing your SMSF loan can become complicated. In comparison to a standard home loan, your lender is technically taking on a lot more risk, as they won’t be able to secure the loan with other claimable assets.

    Moreover, there is another inherent risk to borrowing through your SMSF – if your fund encounters any financial hardship, you will not be able to make further personal contributions. All repayments must be paid directly from your SMSF. Hence, these restrictions can result in difficulties for all parties involved. 

    Can you refinance an SMSF loan?

    Luckily, those with an SMSF have as much control over their fund’s loan as they do over their super and investments. This means that if a member is no longer happy with the conditions of their SMSF loan, refinancing can be a good way to bring the loan back on your terms.

    Although you can refinance an SMSF loan (much like you would with a home loan) the two share drastic differences when it comes time to jump ship on your current loan. The process of refinancing an SMSF loan can be much more complicated and draining than that of a regular home loan, especially if you don’t know what to look out for. Lender requirements and ATO regulations can often be quite tricky to navigate on your own. 

    How to refinance an SMSF loan

    When it comes to actually refinancing your SMSF home loan, there are a handful of requirements you’ll need to tick off the checklist before applying.

    Firstly, you’ll need to ensure you meet the eligibility criteria and confirm that the loan is suitable for your funds’ investment needs. Even though the general process will be strikingly similar to applying for your initial SMSF loan, certain lenders may have additional criteria to be met, so it’s important to check that all parties are satisfied with the conditions before moving forward.

    Moreover, you will also need to have a few key supporting documents at the ready before you submit your application (see the below loan document checklist). 

    It may also be worthwhile seeking out professional advice from a financial advisor to help you navigate through this initial process. Experts like our team at Homestar Finance will be able to guide you in the right direction and ensure you have everything necessary for the refinancing process to sail smoothly. 

    Am I eligible to refinance my SMSF loan?

    There are only a few lenders that will refinance an SMSF loan, and you need to meet strict approval requirements. Though these requirements may differ from one lender to the next, these are some rule of thumb requirements you should have covered:

    • Borrow up to 70% of the property value: Your Loan to Value Ratio (LVR) should be under 70%
    • Interest Rates: Are we offering a better interest rate than what you have now?
    • Interest-only: Available to low-risk borrowers who are not approaching retirement
    • Liquidity requirements: You generally need to have around 10-20% of the property value in liquid assets after settlement, however, some lenders may ignore liquidity requirements
    • Loan term: 30-year mortgage terms available.
    • Current SMSF home loan duration: Your current self-managed super fund (SMSF) loan should be more than 12 months old.
    • Standard residential property: Most financial institutions prefer risk-averse, standard properties in metro locations for your SMSF loan.
    • Standard commercial property: Standard commercial properties like an office unit, a warehouse or a factory can also be eligible.
    • Rental Income: It’s typically ideal for your rental income to cover the cost of loan repayments.

    Don’t fret if you don’t meet these requirements, as you may still be eligible to refinance with us. We’ll just need to perform a few background checks and it just means that the refinance process may take slightly longer than usual.  

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    Loan document checklist

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    The documents required are always subject to lender discretion, though some documents are generally required by most, if not all financial institutions. These include:

    • Bank statements and/or audited financial statements
    • Certificate of Registration (or ASIC search)
    • Certified SMSF trust deed
    • Certified SMSF bare trust deed
    • Most recent SMSF audit report
    • Most recent SMSF financial statement
    • Most recent SMSF tax return
    • Proof of identity (driver’s licence and/or passport copy)

    Why refinance an SMSF loan?

    Though an SMSF loan refinance may be different in comparison to your typical home loan, the reasons behind refinancing are identical.

    In essence, you may want to refinance to obtain a better interest rate, or greater flexibility so that you can either save money or time on your loan.

    Since SMSF interest rates tend to already be on the higher side, refinancing to an SMSF loan at a lower rate could help you save thousands. Similarly, SMSF loan terms tend to be on the restrictive end, so refinancing to a loan that offers better features – such as additional repayments – could potentially save you a lot of time shaving off those repayments.

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    What to consider when refinancing an SMSF loan

    As with refinancing your home loan, there are some things you’ll need to consider beforehand. In addition, there are also some conditions exclusive to the SMSF refinance process.

    We’ve tried our best to keep things simple and cover everything you’ll need below:

    Refinancing costs

    The refinancing process will always cost you some money out of pocket.

    Typically, you’ll have to pay a loan application fee to your new lender, as well as a valuation fee and any ongoing fees from your current loan.

    It’s best practice to try and calculate the cost of refinancing to compare it to the amount you’ll end up saving. Although it may not be entirely accurate in the early stages, it’ll give you a general idea of whether it’ll be worth your trouble to refinance. 

    ATO requirements and tax implications

    The Australian Taxation Office (ATO) has a set of regulations that govern how you can borrow under an LRBA. According to the ATO, a new borrowing that takes place of the old must be done in such as way that the new SMSF loan is solely there to end the terms of the old loan and meet any costs associated with the process.

    This is because the condition of refinancing your SMSF loan entails that the borrowed funds are still being applied for the purposes of acquiring the relevant asset (property).

    This means that you cannot increase the amount borrowed against the property by refinancing an SMSF loan. Seeing as how you can typically borrow up to 70% of the property’s value, the entire cost of refinancing must not exceed this value.

    Interest rates

    Of course, one of the most important things to consider when refinancing is the interest rate of your new loan, but you should also be looking at the terms of your current loan to avoid any nasty surprises. For instance, if you are refinancing a fixed rate loan, you may incur break fees that can end up making the process more expensive than initially imagined.

    This doesn’t mean that you shouldn’t refinance a fixed rate loan, but rather, you should check the terms of the loan to see if the fixed rate period has ended, or if you still end up saving money despite the additional exit costs. 

    Can I access equity?

    As mentioned earlier in the ATO requirements (as per the Superannuation Industry Supervision Act 1993), you will not be able to release equity when refinancing your SMSF loan.

    The only exception being for property upkeep and minor cosmetic work, i.e. replacing carpet or flooring at an older property, or general upkeep and repairs. However, upkeep work refers to changes that are necessary to bring the property back to rent market standard. It cannot involve any significant renovations or property improvements. 

    Should I choose a fixed or variable rate SMSF loan?

    There isn’t really a definitive answer for this question. If you need more flexible loan features or access to interest-only repayments, then variable-rate is usually the better of the two. However, if you are thinking of locking in at a particularly enticing interest rate, then you’d be better off with a fixed rate loan.

    Consider these key differences between the two before making a decision:

    Fixed rate loan

    • Exit fees tend to be much higher for early termination
    • Extra repayments are either limited (generally capped at $5,000-$10,000) or unavailable
    • Rate fixed for between 1 – 5 years
    • Redraw facilities are unavailable

    Variable rate loan

    • Additional repayments can be made to reduce your interest repayments quicker
    • No additional fees or penalties are incurred (other than standard exit fees) for early termination of the loan
    • Redraw facilities are available
    • You can adjust your payments to match interest rate trends

    Though conditions will always vary according to your specific lender, keeping these general points in mind can help you to initially weigh up which type of loan you’re looking for.

    How long will it take to refinance my SMSF loan?

    Refinancing SMSF loans are usually more challenging than your standard home loan, as it is an LRBA that requires you to provide much more documentation and adhere to stricter compliance procedures.

    Generally speaking, most lenders may require more time to process SMSF refinance applications, so you might expect a 4-6 week turnaround time from application to settlement.

    Luckily, Homestar Finance offers expedited approval with our Star Blue SMSF Easy Refinance process. We don’t require copious amounts of documentation and as long as you have them ready, it should take only 3 days for approval.

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    * Bundle and save disclaimer: *Discounts apply to our Star Classic or Essential home loans, no further discount can be applied to the owner occupied Star Gold rate. Existing home loans with Origin Mortgage Management Services and its partners are also excluded from this offer”..

    1 Rates shown apply to new eligible SMSF home loans only, up to 60% LVR, loan amount minimum of $150,000 up to max of $2,000,000 and at least one applicant is on PAYG employment. Rates are subject to change without notice. Existing borrowers may have different interest rates which are dependent on the rate offered to the borrower at the date when a home loan settled and any reductions or increases the lender decided to make on the existing loan over time. Accordingly, there is not one standard variable rate that applies to all Homestar home loans and existing customers can confirm their current rate(s) by logging in to internet banking or by contacting customer service. Terms, conditions, and eligibility criteria apply.

    2 Comparison rates are based on a basic Homestar Finance loan, on a $150,000 loan amount over 25 years. WARNING: This comparison rate is true only for the examples given and may not include all fees and charges. Different terms, fees or other loan amounts might result in a different comparison rate.

    3 Third party cost(s) incurred by service provider(s) are payable and may vary or increase depending on the service provider, nature of the service and request. Any additional cost(s) are passed on directly to the applicants(s). If there is a variation or an increase, a separate quote will be provided.

    4 Disbursements payable.

    5 Discharge fee is waived if loan reaches full term as per the loan agreement.

    * Customers should obtain their own independent legal, financial advice on compliance with the Superannuation Industry (Supervision) Act 1993

    Other fees and charges may apply.

    DISCLAIMER: Terms, conditions and eligibility criteria apply to all our loan products and features. Fees, charges and disbursements are payable. Final approval is subject to credit assessment. Information valid as at 15th November 2023 which is subject to change without notice. Please consider if the product is appropriate for your individual circumstances. If you need assistance or have any questions about a product or feature and its suitability, please contact our Loan Specialists.

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