Many and more Australians today are turning to SMSF loans. Why exactly? Because they understand that SMSF loans are a long-term benefit that can help with superannuation funds, retirement, and more. However, there are two types of SMSF loans—SMSF commercial loans, and SMSF residential loans. To find out which one is best suited to your company, take a look at some of the differences between the two.
The most popular of the two loans are commercial loans. In renting a commercial property, there are many benefits to your business in the long term. Not only are you able to rent the property itself, but you can also invest that money if a member of your SMSF fund helps run your business. You are able to increase your financial gains and help increase your inflow and outflow of money.
The following are standard for an SMSF commercial loan:
- Your loan to value ratio can be up to 75%
- These loans are not available to be used for purposes of construction
- The property is available to lease out to a business that specialises in a related field
- The property is available to purchase specialised or traditional securities.
You may also borrow funds from SMSF loans for the purchase of commercial property, but as this property is then available only to the SMSF fund, you would not be allowed to buy any sort of residential property to rent out. SMSF loans are great for businesses, and commercial loans are ideal for business owners wanting to increase their savings.
These loans are the less popular of the two. While there are benefits, the main reason is that there can be many hidden items and fees that are connected to a residential loan, which therefore drives up your loan to value ratio. Residential loans need to be carefully analysed and closely followed.
The following are standard for an SMSF residential loan:
- Your loan to value ratio can be up to 80%
- These loans are not available to build a house or use for vacant land
- These loans are available to purchase houses, townhouses, and apartments
- Unlike a traditional residential loan, the interest rates for an SMSF residential loan can be up to 1% higher.
While similar, these two loans can vary greatly. Research and check with an expert to see if an SMSF residential or commercial loan is best for you.
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