Commercial Loans

HM Finance Mortgage Solutions provides competitive, affordable loan products for your individual needs.

The lending behaviour by banks since the Global Financial Crisis (GFC), there has been pressure on not exceeding certain loan to value ratios (“LVR”) – especially on commercial properties and specialised securities. There are some lending institutions that have completely withdrawn from commercial lending entirely. The products and the options available to borrowers has dwindled in the last 6 years.

Our commercial mortgage product offering ranges from straight forward facilities to more highly leveraged and structured facilities for

  • Purchasing or re-financing commercial real estate, industrial and retail assets for either owner occupied or investor
  • Specialised solutions for SMSF borrowers
  • Non-recourse facilities, where the director’s guarantees are not available and the only security is the property itself
  • Specialised real estate, such as hotels, motels, petrol stations, caravan parks
  • Structured facilities where the LVR required exceeds the current lending parameters and a structured solutions is required

Our relationships with traditional and non-traditional lenders can help our clients through with:

  • Competitive interest rates across the full mortgage product range – from full doc to non-conforming assets loans
  • Fast turnaround – depending on the circumstances and documentation – conditional approval potentially within 48 hours
  • Flexible LVRs, terms and conditions
  • Non-bank financial solutions – spreading your debt across a range of lenders
  • Access to set and forget facilities
  • Greater lending flexibility
  • Greater servicing flexibility
  • Access to commercial loans that are based on valuation versus purchase price.

Specialised security property generally refers to purpose built properties such as hotels, motels, petrol stations, retirement villages and child care facilities which are viewed differently by lenders to other types of properties.

An important aspects to specialised securities is that that also may carry an enterprise or a going concern value. Typically the value of the property is referred to the “freehold value” and the value of the business attached to the property is the “leasehold value” or enterprise value.

We can make sense of the differences for you and are able to advise on what can be done when purchasing freehold or enterprise properties.

We understand that not all borrowers fit into the mould that easily qualify them for a loan with the Big Bank. We have direct access to a wide range of lenders to facilitate low doc commercial loans across Australia. We can access highly competitive low doc commercial rates and on LVRs up to 80%.

Our style of low doc commercial property loans are typically sourced through private investors and lenders. The loans are structured to suit borrowers who fall outside normal lending parameters and require a more creative approach to meeting their financial needs.

The low doc loan approach is used in situations such as:

  • Unavailable completed tax returns
  • Service on the loan is solely dependent on rent (lease doc)
  • Urgent settlement is required
  • Need to borrow against a property’s valuation rather than the purchase price
  • Finance history not available
  • Overseas resident
  • Remote location of the security
  • Financial distress – such as legal action pending, receivers being appointed
  • Urgent debts – such as ATO tax debt
  • Current lender forcing an exit or refusing to roll over the existing facility

Since changes to legislation in 2007 to the Superannuation Industry Supervision Act (SIS Act), if you have a SMSF, your Fund can borrow funds to purchase a property – beit residential, retail, commercial, rural or with specialised use or zoning. This borrowing is conditional on an acceptable structure being used to manage the fund and handle the funds being borrowed.

Essentially, a Security Trustee will purchase a property on behalf of the Fund and in doing so, it becomes the property holding’s legal owner, holding it in trust for the SMSF (as the beneficial owner). The SMSF provides an equity contribution from the Fund’s assets and borrow the balance of the money.

The Basics of a SMSF Finance Facility

  • A SMSF loan is to a SMSF to assist in the acquisition of a property that is eligibly income producing
  • The money borrowed is fully applied to the purchase of an asset
  • The asset is held in trust and the SMSF acquires a beneficial interest in the asset
  • The SMSF has the right to acquire legal ownership by finalising payment – by paying out any debt owing
  • The SMSF loan facility is a “Limited Recourse” – meaning that the lender cannot touch any other of the SMSF’s assets other than the property held as security against the loan.
  • A SMSF Residential property is generally – up to 80% LVR and up to 30 year term
  • A SMSF Commercial property is generally – up to 70% LVR and up to 20 year term
  • Member/s of the SMSF cannot reside in the residential property, but can purchase a residential property that they intend living in when they retire (subject to the property being transferred out the SMSF)
  • No vacant land can be purchased – with the exception of working rural land where there is an income derived
  • A redraw facility is not available
  • All property purchases must be on a stand-alone basis
  • An existing asset can be refinanced providing it meets SIS Act requirements
  • No leveraging of existing property is allowed. However, you can borrow to repay existing SMSF loans plus costs.

Benefits of a SMSF

  • Maximum of 15% tax rental income
  • Expenses, including interest may be claimed as tax deductions by the super fund
  • At this stage, there may be no capital gains tax on the sale of the property if sold after retirement
  • A maximum of 10% capital gains tax on the sale of properties held for longer than one year
  • Greater investment choices and control over your future
  • The SMSF can pay out or reduce the borrowings at any time (subject to terms of the facility)
  • Through gearing, the SMSF can acquire properties greater in value than the net worth of the Fund
  • All other SMSF assets are safe and cannot be touched by any other lender – due to recourse provisions in Section 67 (4A) of the SIS Act

Rural loans are for borrowers looking to finance rural and rural/residential zoned properties for lifestyle living or as a working farm.

This kind of loan can be used for:

  • Purchasing or improving a rural property
  • Re-financing an existing loan
  • Provide working capital
  • Fund off-farm investments or other worthwhile projects

Want to know more?

Why not get in touch with HM Finance today?

Find out how we can tailor a finance solution for you.

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