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“Many investors are keen to invest and don’t want to miss out on the expected growth in property prices once interest rates fall, but most are unable to get more finance because their borrowing capacity has declined by around 30 per cent due to the“So they’re exploring ways to borrow more, and if they have enough balance in their super, they are now using it to get another mortgage.”“Gianna and I already bought six properties in our personal names, so we’re already tapped out.
“This means borrowers are starting with a clean slate, so to speak. Their costs of living expenses, mortgages and personal income outside their super are not taken into account,” he said.“So even if they don’t have capacity to borrow outside their super, they are likely to qualify for a mortgage when borrowing within their SMSF, as long as they meet the liquidity and deposit requirement which is around 30 per cent of the property purchase.
Funds with balances of between $200,000 and $2 million mostly rely on limited-recourse borrowing arrangements to partly fund an asset purchase. In this case, almost all the assets bought are property, with more than half of this being residential property, according to Challenger. “We’re seeing more second-tier lenders coming into the SMSF space, so the competition is becoming aggressive, which means borrowing is becoming cheaper and easier as long as you meet the deposit and liquidity requirements,” he said.