Refinance your SMSF loan for maximum benefit!

To understand more about refinancing considerations click here.

To understand more about SMSF structures watch this short video.

At present most lenders have stepped out of the SMSF lending space and almost none of them touch refinances within SMSF’s.

This disadvantages most clients as they are typically stuck with an SMSF loan that after a number of years has become non-competitive from a rate perspective, which reduces their SMSF investment returns.

Based on our research and experience, a non-reviewed SMSF loan that has been in place for greater than 3 years can have a current interest rate between 10 - 11%.

Let's break down the potential benefits using a practical example, using simple math.

Imagine you currently have an SMSF loan of $500,000 at a hefty 10% interest rate.

Now, let's explore the possibilities if you refinance this loan to a more favourable rate of 6.99%.

Cost Benefit Analysis:

• Original loan amount: $500,000
• Original interest rate: 10%
• New interest rate after refinancing: 6.99% 

1. Monthly Savings:
    
   • Original monthly interest payment: $500,000 * 10% / 12 = $4,166.67
   • New monthly interest payment: $500,000 * 6.99% / 12 = $2,912.50
   • Monthly savings: $4,166.67 - $2,912.50 = $1,254.17
      
2. Annual Savings:
    
   • Monthly savings * 12 = $1,254.17 * 12 = $15,050.04
      
3. Total Savings Over 10 Years:
    
   • Annual savings * 10 = $15,050.04 * 10 = $150,500.40

By refinancing your SMSF loan, you could potentially save over $150,000 over the next decade.

But the benefits don't stop there.

Consider the advantage of reinvesting these savings back into your SMSF:

• Reinvesting Savings Over 10 Years: $150,500.40

Assuming a conservative return rate of, for example, 7% per annum on reinvested funds:

• Future Value of Reinvested Savings:
   
  • Future Value = Present Value * (1 + Interest Rate)^Number of Years
  • Future Value = $150,500.40 * (1 + 7%)^10
  • Future Value ? $289,572.61

By reinvesting your savings back into your SMSF over the next 10 years, you could potentially grow your fund to nearly $290,000, significantly enhancing your retirement nest egg.

It’s up to you.

Don’t sit on the fence, refinancing your SMSF loan from a higher interest rate to a lower one not only offers immediate financial relief but also presents a valuable opportunity to reinvest your savings, maximizing the growth potential of your self-managed super fund over the long term.

To make this happen and get the benefits call 1300 780 440 or book a time to chat to one of our specialists.