Using SMSF Home Loans: What You Need to Know

Written By Sally Chen

If you’re exploring ways to use your superannuation for investment property, a Self-Managed Super Fund (SMSF) home loan might be one tool in your toolbox. Before jumping in, it’s important to understand how these loans work, what the requirements are, and whether they’re right for you.

What is an SMSF Home Loan?

An SMSF home loan is a loan arranged through your self-managed super fund to purchase an investment property. The SMSF contributes part of the purchase (often via funds it holds), then borrows the rest. The investment returns from the property—rental income or capital gains—flow back into the SMSF to help build retirement benefits.

Key features:

  • The loan must be structured as a Limited Recourse Borrowing Arrangement (LRBA). This means a separate trust (custodian) is set up to hold the asset (the property), so that if the SMSF can’t meet its obligations, the lender’s recourse is limited to that asset—not the broader assets of the SMSF. 

How SMSF Loans Differ from Traditional Home Loans

Since SMSF home loans involve super and investment structures, there are several differences and additional layers of complexity compared with a standard residential mortgage:

  • LRBA requirement: As mentioned, the property must be held in a special trust structure, which means extra legal/structural work.

  • Greater risk to lender / higher costs: Because the lender's risk is higher (less recourse, potentially less liquidity etc.), interest rates tend to be higher than for traditional home loans.

  • Restrictions and compliance: There are rules around who can live in or rent the property, and how it’s used. Complying with super laws (especially the “sole purpose test”) is essential.

How Much Can an SMSF Borrow?

  • For residential property, usually up to 80% Loan-to-Value Ratio (LVR) is allowed — meaning a 20% deposit is needed. 

  • For commercial property, the LVR is typically lower (i.e. you’ll need a larger deposit). For example, commercial property through SMSFs might require 30% deposit (so 70% LVR).

Is an SMSF Home Loan Right for You?

An SMSF home loan can be a powerful wealth-building tool, but it’s not right for everyone. Consider whether your SMSF has enough funds for the deposit and costs, whether you’re comfortable with property market risks, and whether you can stay on top of the compliance obligations.

At WestGen Finance, we help clients set up SMSF loans that are structured correctly and meet all the legal requirements. If you’re thinking about buying property through your SMSF, our team can guide you through the process and connect you with the right lenders to make it happen.

Sally Chen
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