By Christopher Balmford, MD
Several people have asked whether the Cleardocs documents for SMSF Limited Recourse Borrowing are suitable for either of:
- a loan with a variable interest rate; or
- an interest only loan.
The answers depend on whether the lender is a bank or a related party of the SMSF.
. . . and the answers — which our lawyers at Maddocks have given us — are . . .
If the lender is a bank, then the Cleardocs SMSF borrowing documents are suitable:
- for a loan with a fixed interest rate or a variable interest rate; and
- for an interest only loan.
The arrangements about the interest rate and about what is being repaid are in the loan documents — which the bank (not Cleardocs) provides.
SMSF Borrowing from a related party
Fixed/variable interest rate If the lender is a related party, then the Cleardocs SMSF borrowing documents are suitable for:
- a loan with a fixed interest rate. Although they are not suitable for a loan with a variable interest rate, we can arrange for you to contact our lawyers at Maddocks for a free quote for the firm to manually change your documents to allow for a variable interest rate.
- a loan in which both the interest and the capital will be repaid. Although they are not suitable for an interest only loan, we can arrange for you to contact our lawyers at Maddocks for a free quote for the firm to manually change your documents to allow for a variable interest rate. (Also we are discussing with Maddocks whether to modify our documents so that you can order directly from us a document package that is interest only. We’ll keep you posted.)
What to do? If you need a document package for a loan from a related party that is interest only or that has a variable interest rate, then call us on 1300 307 343. We will arrange for you to contact Maddocks for a free quote for the firm to manually change the Cleardocs documents to meet your needs.
If (after Maddocks has given you the quote) you decide to proceed, then here’s what to do:
- First you order the normal Cleardocs $599 SMSF Borrowing (related party) document package.
- After you order the documents from Cleardocs, you email them to Maddocks and instruct Maddocks to manually change the documents to allow for a variable interest rate or an interest only loan. You can discuss this with Maddocks when you order.
- Maddocks will manually change the documents you ordered through Cleardocs to suit your needs. Maddocks will then send those documents to you ready for signing.
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