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Residential Property with Borrowing


 
 
Residential Property with Borrowings

Clients of ESUPERFUND are permitted to invest in Australian Residential Property where the SMSF borrows to purchase the Property. To simplify the Loan Application process, ESUPERFUND (via Beagle Finance Pty Ltd) has established a direct arrangement with Liberty Financial allowing clients to easily apply for a SMSF Loan via the ESUPERFUND Client Portal.

ESUPERFUND is an Authorised Credit Representative (ACR 413 213) of Beagle Finance Pty Ltd ACN 140 290 168 (ACL 383640) which has a licence authorising it to arrange credit.

 
 
In-house Loan Service

The Loan Application Process for an SMSF is not like a typical loan and it can be complicated. In this regard ESUPERFUND provides an in-house loan service to assist clients of ESUPERFUND to submit Residential SMSF Loan applications with Liberty Financial.  By using our in-house loan service, ESUPERFUND will guide you through the entire loan application process and ensure that the strict SMSF Loan requirements (including the preparation of the Security Custodian Trust / Bare Trust) are attended to.  

 
 
Loan Application Process

Once your SMSF has been established by ESUPERFUND and you wish to borrow to acquire Residential Property for your SMSF, you can apply for a Liberty Financial Residential SMSF Loan via the Client Portal here. The Loan Process is detailed here.

 
 
Loan Refinance Process

To the extent that you wish to refinance your existing SMSF Loan to Liberty Financial (fees may apply), you may submit an application via the Client Portal here. The Interest Rates and Fees for Liberty Financial’s SMSF Loan product can be found here.

 
 
Interest Rates and Fees

The Interest Rates and Fees for Liberty Financial’s SMSF Loan product can be found here. While ESUPERFUND will constantly review Liberty Financial’s SMSF Loan Interest Rates and Fees and update our website accordingly, you should always confirm the Interest Rates and Fees by reviewing the Lender’s website or by contacting the Lender directly.

 
 
Permitted Property Types

At this time clients can only borrow to purchase Residential Property that has already been constructed. You may purchase an Off the Plan property with borrowings via your SMSF (subject to the Lender’s credit criteria and limited Loan to Value Ratio and postcode restrictions may apply) however please note that the loan cannot be Formally Approved until title details and a Certificate of Occupancy/Classification are available (i.e. the property has been finished). You may seek an extension of the standard two week settlement period (after property completion) to avoid any late settlement penalties. The investor bears the risk that the property may not be acceptable to the Lender when purchasing Off the Plan Properties.

You may seek loan pre-approval prior to contracting to purchase property via SMSF to ensure that the application meets the Lender’s lending criteria prior to committing to the purchase and to gain a more thorough understanding of the complexities involved in the SMSF borrowing process.

 
 
Lenders Mortgage Insurance

Lenders Mortgage Insurance is not payable on SMSF Loans taken out with Liberty Financial.

 
 
Maximum Loan to Value Ratio (LVR)

The current Maximum Loan to Value Ratio for Liberty Financial’s SMSF Loan product can be found here.

 
 
Maximum Loan Amount

The Maximum Loan Amount available for Liberty Financial’s SMSF Loan product can be found here.

 
 
Minimum Loan Amount

The Minimum Loan Amount required for Liberty Financial’s  SMSF Loan product can be found here.

 
 
Accessing Information by ESUPERFUND

Documentation (e.g. Property Purchase Contract, Bare Trust Deed etc) associated with the property purchase with borrowings via our in-house loan service will be maintained by ESUPERFUND alleviating you of the responsibility of providing these documentation again at financial year end. Additional information such as Rental Income and Expenses will be tracked by ESUPERFUND through the Transaction Bank Account where all Income will be banked and Expenses paid in relation to the Property. Where additional information is required we will request this from you as part of the annual Checklist Process.

 
 
Depreciation Schedule

Clients who have acquired a Residential Property in their SMSF may be able to claim tax deductions for depreciable items including carpets, furniture, fittings and so on. A Tax Depreciation Schedule for the property can be used to substantiate depreciation claims. Please note that the Tax Depreciation Schedule must be prepared by a Quantity Surveyor.  A Tax Depreciation Schedule is a document that lists all the Properties Depreciable Items, their effective life and the dollar value you can claim against your SMSF Income.  For example if your annual depreciation claim was $5,000 you will save $750 in tax annually (ie $5,000 x 15%). For further information on obtaining a depreciation schedule for your property click here.

 
 
Compliant Loans

By having ESUPERFUND involved in the entire SMSF Loan Setup Process, we will ensure that the strict SMSF Loan requirements (including the preparation of the Security Custodian Trust / Bare Trust) are adhered to during the entire loan application process.

 
Product Disclosure Statement

The Product Disclosure Statements for Liberty Financial should be carefully reviewed prior to applying for a SMSF Loan. The relevant Product Disclosure Statements can be obtained by contacting the Lender directly.

 
 
No Loan Advice Provided

ESUPERFUND is an Authorised Credit Representative of Beagle Finance Pty Ltd ACN 140 290 268 (ACL 383640) which has a licence authorising it to arrange credit and has a direct arrangement with Liberty Financial. ESUPERFUND (whether directly or via associated entities) is an execution only Loan Service. That is based on a review of the SMSF Loan Product available you are satisfied that the Lender is appropriate for your SMSF. By applying for an SMSF Loan via ESUPERFUND, we will assist you to obtain an approval for that selected Loan and attend to all associated paperwork. At no time does ESUPERFUND recommend that the selected Lender is appropriate for your SMSF needs, objectives or circumstances.

 
 
Security Custodian Trust / Bare Trust Structure

When acquiring Residential Property using a Loan, the Residential Property being acquired must be purchased under a Security Custodian Trust. This Structure is also commonly referred to an Instalment Warrant Trust or Bare Trust. When you apply for a residential SMSF Loan with Liberty Financial via ESUPERFUND, we will arrange for the preparation of all the required documentation to establish the Security Custodian Trust. The Trustee of the Security Custodian Trust must be a Company. If you have a Company as your SMSF Trustee, this Company cannot be used as the Security Custodian Trust Trustee. The Company must be a completely separate Company. Further information on this Structure can be found in our Loan Theory section here

 
 
Separate Security Custodian Trust Structure for each Property Purchase

A separate Security Custodian Trust must be established for each Property that is acquired. You cannot buy multiple properties using the same Security Custodian Trust Structure. You are permitted to use the same Security Custodian Trust Trustee Company to act as the trustee for each Security Custodian Trust. This saves the cost of establishing multiple Companies.

 
 
How to Complete the Purchase Contract

When acquiring Residential Property using a Loan, the Residential Property must be purchased in the name of the Security Custodian Trust Trustee Company. All Directors of the Security Custodian Trust Trustee Company must sign the Purchase Contract. Please note that the Purchase Contract can be signed with a "subject to finance" clause. You must not put the name of your SMSF on the Purchase Contract if you are borrowing to purchase the Residential Property.

Example:

If the Security Custodian Trust Trustee Company Name is Smith Pty Ltd then the purchaser on your Purchase Contract will be: Smith Pty Ltd. Neither the Trustees of your SMSF or the SMSF itself should be named on the Purchase Contract when borrowing to purchase Property in your SMSF.

 
 
Security Custodian Trust Setup Process and Fee

As detailed above a Security Custodian Trust must be established for each Property that is acquired using borrowings. ESUPERFUND will arrange the setup of the Security Custodian Trust for you when you apply for a residential SMSF Loan with Liberty Financial via our in-house loan service. ESUPERFUND has a one off fee of $500 to set up the Security Custodian Trust. The Security Custodian Trust can be set up after the Loan has been pre-approved but must be set up before the Property has been acquired (ie the Purchase Contract signed). To apply for a Security Custodian Trust with ESUPERFUND you will need to login to your Client Portal and apply online here.

 
 
Security Custodian Trust Company Trustee Setup Process and Fee

As detailed above a Security Custodian Trust must be established for each Property that is acquired with borrowings. The Trustee of the Security Custodian Trust must be a Company. If you do not have an existing Company, ESUPERFUND offers a Company Setup Service. The cost of establishing a Company with ESUPERFUND is . In addition there is an additional annual ASIC Fee of payable directly to ASIC. Please note that you are not obligated to use the ESUPERFUND Company Setup Service and can arrange to set up a Company with any provider desired. The Company details can in turn be provided to ESUPERFUND when setting up the Security Custodian Trust. The Company that will act as Trustee of the Security Custodian Trust can be set up after the Loan has been pre-approved but must be set up before the Property has been acquired (ie the Purchase Contract signed) as the Company will appear on the Purchase Contract. To apply for a Company with ESUPERFUND you will need to login to your Client Portal and apply online here.

No financial product advice or recommendation

No Advice Express or Implied: It is important to understand that ESUPERFUND has not taken into account any particular investor's objectives, financial situation or particular needs. ESUPERFUND does not provide financial product advice or recommend any financial products either expressly or implied. ESUPERFUND expressly states that it does not recommend, represent as suitable, or endorse any financial product or service available through ESUPERFUND. This applies in relation to the Liberty Financial SMSF Loan. ESUPERFUND does not advise or recommend that this loan product is suitable to a particular investor’s financial requirements or needs in relation to their SMSF. Any information provided in relation to the Liberty Financial SMSF Loan is factual information only about the features of the loan product and how data is made available to ESUPERFUND. Accordingly you should read the disclosures relating to the Liberty Financial SMSF Loan before making any decision about whether this loan product is suitable for your SMSF needs. We also recommend that you should seek professional advice from a financial adviser before making any decision to use the Liberty Financial SMSF Loan for your SMSF.

Australian Credit Licence and Credit Representative

ESUPERFUND is an Authorised Credit Representative (ACR 413213) of Beagle Finance Pty Ltd ACN 140 290 168 (ACL 383640) which has a licence authorising it to arrange credit.


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