Security Custodian Trust by St George Bank – has any one used this product to purchase residential property for a SMSF?
Hi Mav
Yes, do them all the time.
The St George SMSF loan requires a bare trust to be established.
To ensure that the loan has limited recourse to the SMSF's assets the SIS Act legislation requires that the asset is held within the bare trust which the banks call the security custodian trust.
This entity must be a company and have no other duties other than acting as a bare trust.
Establishing these is fairly simple however you will need to speak with your financial advisor who should be able to assist.
Also getting this part wrong can be costly as the bank will have its lawyers vett the instalment & security custodian deeds and if wrongly prepared will want them changed/amended. This is some instances can add to the overall cost greatly.
Thanks Mike, when the banks look at serviceability do they look at your personal dept and serviceability or is it a stand alone lend to the SMSF ?
Servicability is generally based upon a percentage (70%-80%) of the rental and SMSF contributions as well as other SMSF investment income if the fund is an existing fund and has other income generating assets.
In some cases (and dependent upon the lender) they may also look at the members own personal financial position however this is to see that there is no existing loan commitment issues there as well. Having said this this is mainly only when additional salary sacrifiice member contributions are required.
Where possible, it is much easier if you can do internal lending, the rules laid down by the banks are too rigid and quite often waste your time.
Thanks Mike and number8, what is internal lending?
Mav wrote:Thanks Mike and number8, what is internal lending?As Birchcorp says internal lending may be easier for some people and is done when the members become their own banker and lends the SMSF the required funds.
SMSF Members loans are loans provided by members (or sometimes related parties) using their own funds or funds borrowed against own equity via nornal loan or LOC on a full recourse basis. The member would then make a limited-recourse loan to the fund.
The advantage of this arrangement is that the full-recourse bank loan to the member may be much easier to arrange (and less costly) than a SMSF loan directly from the bank to the fund trustee.
On the using of own funds some people prefer to provide this as a complying loan rather than make a contribution which may breach concessional contribution limits.Thanks Mike and number8
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