An investment property purchased by an SMSF (self-managed super fund) may require an SMSF loan. Generated returns on the investment – rental income or capital gains are sent back into the super fund, increasing your retirement savings.

This also makes investing with your super a bit tricky. SMSF investments are not as straightforward as normal investment loans. The investments need to be in the best interest of all the fund members and in accordance with current SMSF rules and regulations.

With the Mortgagor being the security custodian, the loan is made out to the trustee of the SMSF in their capacity as trustee. In this case, the lender has a limited recourse. If the loan is in default, they have no ability to claim the other assets held by the trust.

Some lenders may require personal guarantees from the members while others don’t. This depends largely on the deposit amounts. The net worth of the members can also influence the requirement.