Cheapest Mortgages Through Your Super
Over the last several years the popularity of self-managed super funds (SMSFs) has been increasing dramatically. Also called super funds or just “supers,” these funds are used by well over 800,000 Australians to invest. The total amount invested is somewhere around $280 billion in superannuation. Much of these investors are using special accounts that allow them to man the operation themselves. The DIY funds are preferred by most Australian investors for the fact that they allow them far more control over their super.
Still, others may use these kinds of accounts because they offer one of the only ways they can obtain specific assets such as property. In fact, more people are using supers to get better deals on mortgages than they can through more traditional home financing services. Even among the other superannuation funds that are available, the self-managed ones may be even more affordable options for prospective home buyers.
There are some definite cost savings to consider.
Pros and Cons
When you decided to seek financing for a property using your super, you might want to review some of the advantages and disadvantages associated with these funds. Below is short list of features that helps to explain both the pros and cons to these supers and show how they can be used to secure cheap home loans (among other things).
1. More control. You will have more control if you choose a self-managed super. With this freedom comes added responsibility so you need to understand the consequences of making a bad investment decision. You need to understand the super rules and ensure that the fund abides by them. It is your responsibility as a SMSF trustee.
2. More options. You will have a broad range of options available with these super funds so you can pick all sorts of investments like direct property, fixed interest, property trusts, shares, and managed funds. It takes both skill and good time to make the right choices at the right times. You can get help at certain stages from a broker or adviser.
3. Save on fees. You will be able to save on many fees associated with the super. In most cases, you must have an amount of above $300,000 to see any savings on this type of super versus others. If the total is less then you could end up paying more than if you would have used a normal retail or industry fund.
4. Borrowing assets. You have the option of adjusting your super fund to enable you to buy assets like properties using specific loans or instruments called self-funding installment warrants, which are associated with shares.
Buying Property
You might notice a few things from that short list of features. Obviously, if you have the means to secure a loan based off the funds you have in the super, then you can use it to get less expensive financing. Most banks and lenders will not lend to super funds for the purposes of buying investment real estate. However, some will consider the more specialized market represented by super funds so you need to look carefully for different properties.
If you want to purchase a residential loan, you might be able to get them at discounted interest rates depending on the lender. For the standard SMSF loan, you can borrow up to 80% of the property value. Other lenders may restrict the amount of the loan to around 75% or even 72% of the total property value.
A self-managed super fund may borrow money for loan purposes may be based on certain regulations or failures to meet repayment obligations on the fund. You may have to do research to get a full list of possible options as well as other applicable restrictions.
This article was written by Tomorrow Finance. For further information on how to obtain the cheapest home loans on the market, view www.tomorrowfinance.com.au
