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Finance News

Lo Doc Loans May Soon be a Thing of the Past

As many are now aware, the finance world is changing. As a result, some finance products are being phased out while others are just beginning to emerge. In recent times it has been increasingly difficult to obtain Lo Doc mortgages. This is something being experienced across the entire finance industry.

Many lenders and mortgage insurers will no longer be accepting applications for Lo Doc loans while others will make it even more difficult for applicants to successfully qualify.

This has not happened yet, but will very soon! Now is the time to get a mortgage check up and assess your finance requirements going forward. The GoMC team can help you decide whether you should make any adjustments to your loans before lenders close the doors.

Recent Changes to Superannuation

Self managed superannuatiuon funds (SMSF) can now borrow money to purchase real estate.

One of the major criticisms of superannuation has been the inability of a SMSF to borrow money and purchase and invest in direct property. Many SMSFs have sought to diversify and add direct real estate to their portfolio only to find they can’t borrow. Not being able to borrow significantly limits the ability to buy the real estate investment outright. It also means they were not able to take advantage of leverage as they please.
This has all changed following amendments to the Superannuation Industry Supervision Act passed in September 2007. It’s now possible for a Superannuation fund to borrow money to buy residential, commercial, retail and even holiday units so long as a special structure is used. An investor can have just as much choice and control over investment properties inside as outside a superannuation fund. It might be time for you to investigate your superannuation options as a whole new world as just unfolded.

How does it work?

The SMSF is formed and funds are transferred from you current super fund

A ‘Property Trust’ is formed in the SMSF

The property trust purchases the property, obtains the loan and becomes the legal owner

SMSF is the beneficial owner of the property

Lender has no recourse against the assets of the SMSF other than the security property.

Lender can use its standard loan documents and lending procedures

In Summary, using an Instalment warrant style structure allows the Super Fund to purchase an investment property via a 3rd party (a Property Trustee) who holds the property in trust until the loan is repaid.
Superannuation is a complex arena, and not all banks and brokers understand how to obtain a loan for your borrowings in super.
With Go Mortgage, arranging a ‘Super home loan’ is easy. We have the expertise and work with a network of people including accountants, solicitors and financial planners that help us help you in your quest of gearing your super assets. We also have access to a variety of lenders offering loans specially tailored for Super. This is important as the loan your super ends up with, not only needs to work for you but also needs to be compliant with the superannuation act.

Before deciding whether to borrow with your SMSF, you should consult your financial planner or accountant. We recommend you also obtain independent taxation and legal advise before commencing any finance on behalf of your SMSF.