Joined: 06/December/2006
Location: Australia
Posts: 7
QuoteReplyTopic: Installment Warrants for Residential Property Posted: 21/June/2009 at 06:38
Hi,
Does anyone know of any banks that are offering non-recourse installment warrant type loans at interest rates comparable to normal residential property loans?
An alternative I read about is to set up a trust with myself as trustee that borrows money against my own home and then on-lends to my SMSF with an arms-length installment warrant type loan. I think the ATO has not given categorical approval for that approach or am I wrong?
Most of the big banks are now offering the non recourse installment warrant type but fees are around $ 10000 to $ 15000 to eatablish with interest rates of 12% at least.
the second appraoch you mention is not possible ,
The big banks (Westpac, NAB etc) are offering the limited-recourse loans.
Set up costs include:
- loan application fees
- banks legal fees (e.g. Westpac's legal fees currently $2420)
- cost of trustee company to hold the title and custodian trust documentation ($1500 to $4000 depending on supplier)
- SMSF and SMSF trustee company costs if you don't already have a SMSF
The LVRs are up to 80% and interest rates about the same or slightly higher than normal investment property loans.
They are a little stricter on the serviceability aspects of your loan application - you need to show a solid history of contributions and the rental yield needs to be half decent.
It is highly recommended before attempting to buy a property using a SMSF loan to check the max lend and serviceability.
You can download this calculator from St George (I am not recommending St George - I just like the SMSF loan calculator)
Overall a SMSF loan will cost you more compared to buying in your own name, but the tax benefits are huge (especially long-term - and property is a long-term investment) and in a lot of cases it is extremely worthwhile buying property via a SMSF because you may already have most if not all of the deposit tucked away in your boring old super fund!
Evolve
General comment only-doesn't constitute advice. Before making financial decisions see a professional adviser who knows your specific circumstances.
http://www.evolvemysuper.com.au
Ripper spreadsheet Evolve. Thanks. I've been listening to the interview you link you on SMSF borrowing. It's given me more info in a clear and concise way than I've been able to gather on the net and in interviews. Thanks again
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