When you’re holding property inside your self-managed super fund (SMSF), knowing when to refinance your SMSF loan and how to execute the process smoothly can materially impact your fund’s performance. In our role as mortgage brokers specialising in SMSF lending, we’ve seen trustees miss optimal opportunities simply because they waited too long, or attempted a refinance without full preparation.
This guide from Ausfirst Lending Group covers everything you need to know about SMSF refinancing, including timing triggers, suitability factors, the full process, potential challenges, and long-term advantages.
Knowing When It’s Time: Common Triggers for SMSF Refinancing
Refinancing works best when it aligns with changes in your loan, property, or fund performance. Understanding what typically prompts SMSF trustees to review their loans can help you decide if the timing is right. Here are some key triggers to look out for.
When Interest Rates Drop or Fixed Terms Expire
Refinancing may make sense if your SMSF loan rate is no longer competitive. Rates can shift quickly, especially as most SMSF loans are with specialist non-bank lenders whose pricing changes more often than traditional banks. If your fixed-rate term is ending or your repayments have started to strain your cash flow, it may be time to review your options. Check any break fees, compare total switching costs, and confirm whether a new loan offers meaningful savings or better features. If your fund’s rate sits well above current market levels and your cash flow is stable, refinancing could be a timely move.
When Your Property Value Has Grown
A higher property value can strengthen your SMSF’s position with lenders by improving your loan-to-value ratio. This may help you negotiate a sharper rate or more flexible terms. However, SMSF rules generally prevent borrowing extra funds or using equity for renovations or unrelated investments. The main benefit lies in improving your loan structure and aligning it with your fund’s current goals. If your property has appreciated and your loan terms are outdated, refinancing could help your SMSF operate more efficiently within ATO guidelines.
When Your Contributions or Rental Income Change
Shifts in rental income or member contributions can affect your SMSF’s ability to manage repayments. If inflows have grown, you might refinance to shorten the term or move from interest-only to principal-and-interest repayments. If income has fallen or contributions are likely to reduce, refinancing to lower repayments may stabilise cash flow. Always review the fund’s liquidity and ensure it can meet obligations under different scenarios. When your fund’s income pattern changes, adjusting your loan through refinancing can help maintain balance and reduce financial pressure.
When Your Current Loan Terms No Longer Fit
Loan structures that once worked may not always suit your SMSF’s evolving needs. You might want to change repayment types, extend or shorten the term, or access modern features like offset accounts or redraw facilities. Some lenders also update or withdraw SMSF loan products over time, which can limit your flexibility. If your current loan no longer supports your fund’s objectives or cash flow needs, reviewing refinance options can help realign your structure and maintain efficiency.
When Lender Service or Policy Changes
Sometimes a lender’s internal changes make refinancing unavoidable. Major banks have largely exited SMSF lending, and many non-bank lenders regularly update policies, increase liquidity requirements, or alter product features. If your lender’s new terms reduce flexibility or affect your fund’s ability to meet conditions, it may be safer to switch before issues arise. Refinancing early can help preserve stable loan terms and ensure your SMSF continues operating within a lender’s current policy settings.
Assessing Suitability: Should Your SMSF Refinance Now?
Refinancing can strengthen your SMSF, but the timing and structure need to be right. Review your fund’s position, costs, and compliance to ensure it aligns with your goals. Here are key points to consider first:
Reviewing Your Fund Strategy and Liquidity
Before refinancing, check that your SMSF’s property and loan structure still support your investment goals and member stage. Your fund should hold enough liquid assets to cover repayments, insurance, and vacancies, with most lenders expecting a post-settlement buffer of around 10–20% of the property value. If a rent drop or major expense would strain cash flow, refinancing may not be the right move, even with a lower rate.
Comparing True Costs vs Potential Savings
Refinancing costs such as valuation, legal, and break fees can add up, so compare them against your potential savings. Look at how much a new rate or term would reduce repayments after factoring in upfront costs over several years. If property values, income, or tax positions change, the expected savings may disappear. Only refinance when the long-term benefits clearly outweigh the total cost.
Checking Compliance with ATO and Lender Rules
An SMSF refinance must meet ATO and lender requirements. The loan must remain a Limited Recourse Borrowing Arrangement (LRBA) linked to the same property, with no cash-out or equity release allowed. Your trust deed, custodian structure, and trustee setup must stay compliant, and most lenders want at least six to twelve months of clean repayment history. Always confirm with your accountant or adviser that the refinance fits your SMSF’s investment strategy and super rules.
How to Refinance Your SMSF Loan Smoothly
Refinancing an SMSF loan takes careful planning and coordination to stay compliant and avoid delays. With proper preparation, the process becomes much smoother. Here’s how to approach each step effectively.
Step 1: Review Your Loan Documents and Performance
Start by reviewing your current SMSF loan and property performance. Gather your loan contract, interest rate details, repayment type, and any expiry dates for fixed terms. Check the property’s current value and organise supporting documents such as your SMSF trust deed, custodian deed, financial statements, and repayment history. Assess rental income, expenses, and contribution patterns to see how your fund is tracking. Comparing your existing repayments and costs against potential new loan options helps identify whether refinancing is likely to deliver real value.
Step 2: Speak with Your SMSF Mortgage Broker Early
Engaging an SMSF mortgage broker early can make the process faster and smoother. A broker can help you compare lenders, as many major banks no longer offer SMSF loans, and policies differ between non-bank lenders. We review not only interest rates but also features like offset accounts, repayment flexibility, and term options. We also check your fund’s eligibility, assess total switching costs, and coordinate with your accountant, auditor, and lender to ensure everything stays compliant. Early preparation helps avoid delays and keeps your refinance aligned with your SMSF strategy. It may also be worth considering how different lender types approach SMSF lending, especially if you’re still in the process of choosing the right SMSF loan lender.
Step 3: Update Your Property Valuation and Financials
Before submitting an application, ensure all financial and property documents are up to date. Most lenders require a recent property valuation, current audited financial statements, and proof of consistent contributions. Your fund will also need to show enough liquidity to manage repayments and other expenses after settlement. Review your trust and custodian deeds to confirm compliance and provide a solid repayment history for the existing loan. Keeping these records organised gives lenders confidence and helps your refinance progress smoothly.
Step 4: Submit Refinance Application and Lender Assessment
Once everything is ready, your broker will lodge the refinance application and submit all supporting documents. The lender will assess your fund’s trust structure, property details, and financial position, including liquidity and repayment history. You generally can’t increase the loan amount when refinancing an SMSF loan, as borrowing must stay tied to the same property. If your refinance is approved, you’ll receive a loan offer confirming the interest rate, fees, repayment setup, and other key conditions. Your broker will review these terms with you to ensure they match your fund’s goals and SMSF compliance requirements.
Step 5: Settlement and Loan Transfer
After accepting the loan offer, the new lender will arrange the settlement and discharge your old loan. The property’s security will be transferred correctly under the SMSF or custodian trust, and repayments will begin under the new terms. Make sure your fund records are updated with the new loan details and confirm that repayments are set up accurately. Monitor the first few payments to ensure cash flow remains steady. A smooth settlement ensures your SMSF stays compliant and avoids any interruption to your investment strategy.
Long-term benefits of refinancing at the right time
Refinancing at the right time can make a meaningful difference to your SMSF’s performance and stability. A well-planned refinance can lower costs, improve flexibility, and align your loan structure with your fund’s long-term goals. It can also open access to lenders that better support SMSF borrowing and future investment plans.
Some of the main benefits may include:
- Reduced interest costs
- Improved cash flow and flexibility
- Access to better loan features
- Closer alignment with fund strategy and goals
- Stronger lender relationship for future opportunities
Final thoughts and next steps
Refinancing your SMSF loan isn’t about chasing the lowest rate, it’s about making sure your fund remains efficient, compliant, and aligned with your long-term strategy. The right timing, preparation, and structure can make the process straightforward and worthwhile. When your fund’s cash flow, investment goals, and compliance all line up, refinancing can help strengthen your SMSF for the years ahead.
If you’re considering refinancing, it’s worth getting the right guidance before making a move. As a trusted mortgage broker in Queensland, Ausfirst Lending Group can help you review your current SMSF loan, compare lender options, and assess whether refinancing fits your fund’s financial position and goals.
A well-timed refinance can make all the difference. Get in touch today to explore what refinancing options may work best for your fund.
Frequently Asked Questions (FAQs)
Yes, some lenders may still consider refinancing even if your SMSF property is vacant, as long as your fund shows strong liquidity and repayment capacity. You’ll usually need to provide evidence of savings, contribution history, or lease plans once a new tenant is secured. An SMSF mortgage broker can help identify lenders who are comfortable with temporary vacancies.
It’s wise to review your SMSF loan every 12 to 24 months or whenever market rates, fund contributions, or property values change significantly. Regular reviews help ensure your loan remains competitive and suited to your strategy. You don’t need to refinance every time, but staying informed lets you act when timing and conditions are right.
Yes, but the process can be more complex. Each property is usually held under a separate bare trust, so refinancing one doesn’t automatically include the others. Lenders will assess each loan individually based on cash flow, LVR, and compliance. Working with a broker experienced in SMSF lending can make it easier to coordinate across multiple properties.
Refinancing doesn’t usually change your tax position, but your SMSF auditor will need to review the new loan documents to confirm compliance. You must record the refinance in the fund’s minutes and provide updated paperwork for the annual audit. Keeping documentation accurate and transparent helps your fund stay compliant with ATO requirements.
Yes, you can choose a fixed-rate refinance if your SMSF wants predictable repayments. Fixed rates may offer stability, especially in a rising rate environment, but they can also limit flexibility if you plan to make extra repayments. Comparing both fixed and variable options with your broker can help balance certainty with flexibility.
