Even though SMSF home loans use the property you are buying as collateral, that does not mean you can avoid doing some careful research before applying. Assessing your financial circumstances is very important if you plan on getting the best loan features, structure, interest rates and loan terms. Unfortunately, many people simply apply for a SMSF home loan without proper preparation and wind up spending thousands of dollars more than they should over the course of the loan.
Make Sure Your Credit File is Accurate and Up to Date
Credit reports are only as good as the information provided to the reporting agency. Here are just a few situations that can have a negative effect on your credit without your knowledge:
- a lender uses your identifying information by mistake and places negative markers on your credit report
- identity thieves may have taken out loans, credit cards, or even mortgages using your good name and reputation
- a creditor fails to mark a payment you made on your account, and then reports the late marker to the credit reporting agency.
Failure to address these issues before applying for an SMSF loan can result in higher interest rates and a reduced ability to negotiate for the best terms possible. While it may take a month or two to straighten out your credit file, it is more than worth your effort.
Gauge Your Super Fund and Projected Earnings
At the current time, your Super may look stable and capable of supporting you during your retirement years. If you take out a loan now, and then fall on hard economic times, your Super will also stop growing. From health problems to job loss, you should always consider both positive and negative influences on your retirement fund. If you find catastrophic projections more likely than positive growth, it may be best to wait before committing to taking out loan using your Self Managed Super Fund
Decide What You Want to do With the Loan Money
Having money without a viable spending, savings, and investment plan is a sure path to ruin. It does not matter if you earned the money or borrow it in the form of an SMSF loan. Before you apply for a loan, think about how you will spend the money, and if those plans are really worth the effort. For example, if you already own one home and have an investment property, but very little in the way of liquid capital, think twice before buying another investment property. The last thing you will want to do is secure a piece of prime property, and then not have the funds available service the debt.
SMSF loans are a valuable tool as long as you take sensible steps to get the best possible deal. Making sure your finances are portrayed in a positive light, gauging the economy, and planning your expenditures will ensure you can pay the loan back and progress financially at the same time.
Contact the team at Sherlock to see if a Self Managed Super Fund Loan is right for you and we will tailor a comprehensive loan proposal suited to your individual needs.