Firstmac SMSF Loans

Self-managed superannuation funds (SMSF) are tasked with making high-performing investments in the best interests of their members, including property investments.

While there are rules surrounding what properties are suitable for SMSFs and how they can be used after they’re purchased, property investment can be a tried and tested path to wealth-building.

Firstmac’s SMSF residential loans offer a competitive solution for customers looking to refinance or to purchase a new residential investment property within an SMSF.

Chief financial officer at Firstmac James Austin said SMSF investment through residential real estate continues to go from strength to strength.

"Investment of superannuation funds into residential real estate is increasingly popular given the relative stability of housing prices, and the tax advantages associated with superannuation," Mr Austin told Savings.com.au.

According to the latest ATO figures, the number of SMSFs continues to rise in Australia with more than 616,000 funds as at March 2024, up 3.4% on the previous year.

Although SMSFs cover around 1.1 million members - less than 5% of the population, their assets represent around 24% of the total value of assets invested in super.

Read more: How to set up a SMSF

How does a Firstmac residential SMSF loan work?

Firstmac’s residential SMSF loan product is essentially a home loan specially designed for SMSFs to purchase a residential investment property.

The loan works much the same as a regular investment home loan but for the purposes permitted under legislation governing SMSFs and a fund’s own trust deed, which sets out the rules of the SMSF as an entity.

Read more: A guide to SMSF borrowing

The Firstmac loan can be used for the purchase of a residential house, unit, or townhouse, but not for vacant land or multiple dwellings on one title.

Under the loan terms and conditions, the borrower is the SMSF trustee with the property held in trust by a corporate or individual property trustee.

How does a Firstmac residential SMSF loan differ from a regular home loan?

The main difference between an SMSF loan and a standard home loan is the recourse. SMSF loans are what’s called a ‘limited recourse borrowing arrangement’, or LRBA for short.

With an LRBA, the lender is limited in recourse, which means if the borrower defaults on the loan, the lender can only go after the asset the mortgage is secured against.

It can’t go after other assets held in the SMSF and this is why interest rates are typically higher on SMSF loans than regular home loans.

Read more: A guide to buying a property through an SMSF in Australia

SMSF property investment restrictions

It’s crucial SMSF funds looking to invest in property abide by the restrictions on the type of property purchased and how it is used, including:

• A trustee, or anyone related to the trustee, cannot live in a residential property purchased through the SMSF.

• A trustee, or anyone related to the trustee, cannot rent the property purchased through the SMSF.

• The SMSF cannot buy a property owned by a trustee or anyone related to the trustee.

• The purchase must meet the ‘sole purpose test’ of solely providing retirement benefits to fund members.

If the property the SMSF is looking to purchase meets the criteria, the Firstmac residential SMSF home loan offers an easy-to-understand policy and a fast approval process in line with the company’s regular loans. Here are the details:

Firstmac SMSF Loan features

Firstmac Residential SMSF loans feature:

• Liquidity benchmark of 5%

• Minimum loan amount of $50,000

• Maximum loan amount of $2,000,000 for loan-to-value ratio (LVR) of 70% and $1,500,000 for LVR 80%

• Maximum LVR 80%

• Maximum loan term of 30 years

• Variable rate or option of fixed rates for two, three, or five years

• Online access 24/7

• Unlimited extra payments permitted for variable loans; maximum of $10,000 a year for fixed rate

SMSF Loan fees

Firstmac Residential SMSF loans come with no application fees, no annual/monthly fees, no settlement fees, and no legal fees for a refinance. Fees that apply include:

• Valuation fee - $220 or at cost

• Lenders legal fee - $490 for new purchase

• Discharge fee - $300

• Optional rate lock fee - $350 (for fixed rates and compulsory for five-year fixed rate terms)

Eligibility Criteria

Firstmac Residential SMSF loans require the following criteria to be met:

• Borrow between 70-80% of the property’s value.

• The property will need to meet the SMSF loan criteria such as the purchase of a standard residential house, unit, or townhouse.

• 5% liquidity benchmark post-settlement

• All serviceability must be through the SMSF

• Loans to be supported by personal guarantee/s from the beneficiaries of the SMSF

Supporting Documents

All applications require:

• Signed loan application form with submission notes (DocuSign for SMSF is available through Firstmac OnTrack secure online portal)

• Recent super fund statement/s evidencing contributions, cash, investments, rentals

• Evidence of rental of the proposed property, and rental statements for any other properties held by the fund not taken as security (if applicable)

New Purchase Applications:

• Contract of Sale (fully signed and dated) for the property being purchased with either Trustee of Bare Trust/Property Trust as purchaser. (A Bare Trust is used when the SMSF wants to borrow funds from a third party for investment purposes.)

• In Victoria, South Australia and Tasmania, a copy of a nomination form nominating the Trustee of the Bare Trust/Property Trust as purchaser

Refinance Applications:

• Previous independent legal advice with six months statements for the loan being refinanced

PAYG & PAYG Self Employed - Income Verification:

• Two most recent pay slips evidencing super contributions

Self Employed Members – Income Verification:

• Last two years' SMSF cash management account statements or existing superannuation statements to be rolled over, evidencing contributions, cash, investments

Trust Documentation:

• Certified copies of SMSF Trust Deed and any Deeds of Variation

• Certified copy of Bare Trust/Property Trust Deed

• Confirmation that SMSF is compliant on Super Fund Lookup

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