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In light of the heat the SMSF lending space has felt in the past 12 months on whether it should it stay or go, waiting for a verdict from government bodies was nerve-racking for some operators who focus on this space.
It appears it’s here to stay for now, but how will the next 12 to 18 months play out given the situation a lot of trustees are in with off-the-plan purchases?
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We have experienced a surge in enquiries from clients searching high and low for a solution to settle their off-the-plan purchases that they committed to based on their ability to borrow at the time. Policies have changed and the solutions are becoming harder and harder to find. From some lenders pulling their product altogether, to others reducing LVRs and introducing strict qualification guidelines that a lot of trustees couldn’t meet, we find our industry creating a huge problem for consumers.
I have deals on my desk so strong that any bank would throw money at them outside of super, but inside of super it’s just not going to happen no matter how strong the profile.
One potential solution for any brokers that have clients in this situation – and this will only work with some clients in a very fortunate position – but where they have another property with enough equity and the income to service the debt outside of super, they can draw on this in their personal name and become their own lender to their SMSF. This means writing their own rules, their own LVRs and their own rates – hopefully creating a solution to their problem. Have them speak to their accountant or one of the accountants in your network about how this can be structured and what implications they need to consider.
As for the other clients that can’t do this and need 80 per cent for an off-the-plan purchase, I am not quite sure what they are going to do – on-sell the contract if they’re lucky, lose their deposit and a good chunk of their super? Wasn’t it designed to avoid this? I understand customers need to be careful when buying off-the-plan, but unfortunately they generally do this before speaking to their financial planner and broker. Consumers will be making a lot of noise on this in the coming years.
Any other solutions for these clients would be welcomed.
Sean Murphy, senior credit adviser, My Mortgage Freedom
Starting his finance career at Liberty Financial in 2007, Sean developed a passion for specialist lending and the challenge of finding a solution for every client.
Having been a BDM at Liberty for almost three years, Sean decided it was time to move on and joined My Mortgage Freedom in the beginning of 2014. Sean's background in SMSF lending and non-conforming residential and commercial mortgages gives the team great scope when dealing with their clients.
Sean's objective is to work with a range of clients in different situations to assist them no matter how challenging the transaction might be.
