“We've gone up to 90% LVR on the SMSF product range, which now includes metro, non-metro, and regional plus residential and commercial,” said Matthew Fernihough (pictured above), executive officer at FinSecure.
“On top of that, we’ve eliminated clawbacks on the product range as well, along with a host of other products.”
Interest only and offset SMSF policy
With major banks retreating from the SMSF lending space after the Royal Commission, creating an environment of rising interest rates for SMSF borrowers, opportunities have emerged in the niche asset class.
Brokers have seized this moment to refinance existing SMSF borrowers on cheaper rates.
However, the SMSF market is quickly moving beyond refinancing with a surge of activity among investors – and innovation among lenders.
As of June 2022, the nearly 603,432 SMSFs in Australia had a combined total of 1.1 million members, according to Super Guide. Although this represents less than 5% of Australia’s population, they accounted for $868.7 billion in assets, or about 26% of the $3.3 trillion invested in superannuation.
Even so, many lenders have traditionally found it difficult to provide flexible and competitive rates due to the increased complexity and scrutiny of the credit policies.
“Our SMSF is one of the more flexible ones. Some of them don't allow you to do interest only or have offset just because of the compliance around managing that type of facility,” said Fernihough.
“We are one of the few lenders that do allow you to have interest only and offset on your SMSF.”
Non-conforming SMSF lending
Beyond LVRs and loan structures. FinSecure's credit policy itself is designed to be more accommodating.
They acknowledge that unexpected life events can impact credit scores, and they are willing to work with borrowers who have a couple of defaults or credit blemishes.
“We’ve just extended our SMSF policies into a non-conforming program that allows for people that have credit impairment to enter into an SMSF loan,” Fernihough said.
For example, If the client had an adverse life event or they have a couple of defaults, Fernihough said the mortgage manager wants to be flexible enough to help these people.
Flexibility on additional super contributions
Another way FinSecure promotes flexible SMSF policies is by removing restrictions around additional superannuation contributions.
Normally, lenders want to see a history of you making extra contributions to your Super fund beyond the employer contribution (around 11% in Australia). However, FinSecure will consider your future ability to make these contributions when deciding if you qualify for the loan.
“If you haven't actually been contributing those extra contributions into your super fund, but you have the capacity to do it, we can allow those future contributions to be adopted for servicing purposes,” Fernihough said.
“To demonstrate that you can make them, what we look at is your individual serviceability, and check [that you] have the ability and the means to be able to make those additional contributions. So if you're wanting that SMSF loan and you're saying you're going to make those contributions, as long as you can service that, we can actually adopt that into servicing.
“Our credit policies are designed to be flexible and we are a leader in this space that ensures more people have access to the product.”
