A 9.5% interest rate is usually where most conversations end before they’ve really begun.
For many borrowers, it immediately falls into the “too expensive” category, and on the surface, it’s easy to understand why. It’s not a rate you would typically choose, and it certainly doesn’t look attractive on paper.
But in property investment and Self-Managed Super Fund (SMSF) lending, the rate is rarely the full story. In many cases, focusing too heavily on rate alone can mean overlooking opportunities that are better aligned with long-term investment outcomes.
At HKW Finance, the real question isn’t “is this a good rate?” but whether the decision makes sense in the context of the broader strategy.
The Situation
In one case, a client approached us with an opportunity to purchase a property through their SMSF.
The asset itself was strong, with good fundamentals, a solid location, and clear long-term potential.
The challenge wasn’t the property, it was the borrower’s position at the time. Due to their structure, age, and lending profile, options were limited. Traditional lenders were restrictive, and flexibility was minimal. As a result, the most viable solution available was a 9.5% loan.
On paper, it’s an easy decision to dismiss. If the only focus is the rate, the answer is simple: walk away.
But that wasn’t the question we were trying to answer. Instead, we looked at it differently:
- Does this asset support the broader SMSF and retirement strategy?
- Is there genuine long-term growth potential?
- Does it strengthen their overall investment position?
- And can the holding cost be improved over time?
When you shift the conversation from rate to strategy, the decision starts to look very different.
Looking Beyond the Interest Rate
The focus was never whether 9.5% was ideal. It was whether the opportunity itself made sense.
In this case, the property aligned well with the client’s long-term retirement objectives and fit neatly within their SMSF strategy. Importantly, there was also a clear pathway to improve the lending position over time as the asset and borrower profile strengthened.
That distinction is critical.
Because in structured lending, especially SMSFs, the starting point is rarely the final position.
What Happened Next
Around 12 months into the loan, the client had maintained strong conduct. Repayments were consistent, and the facility was performing well.
This created leverage.
While it wasn’t the right time for a full refinance, we were able to negotiate an improvement into the low 8% range, a meaningful step forward.
From there, the asset continued to grow. A new valuation came in at $1.675 million, representing more than 30% growth in roughly two years.
This shift opened the door to a full refinance, ultimately bringing the loan down to below 7%, placing it close to best-in-market for SMSF lending.
Why Time Matters in Lending Decisions
If the decision had been judged purely on the initial 9.5% rate, it likely wouldn’t have progressed, and on paper, walking away would have looked like the safer option.
But safe decisions aren’t always strategic decisions.
In this case, time, asset performance, and structure all worked together. The property was given room to grow, and the lending position evolved alongside it.
That’s often how strong investment decisions actually play out. Not instantly, but progressively over time.
The Takeaway
No one enters a deal expecting to stay at a 9.5% rate long term.
That was never the objective.
The focus was always on securing the right asset at the right time, even if the initial structure wasn’t ideal, and then improving the position as circumstances evolved.
And over time, that’s exactly what happened.
Thinking Beyond the Rate
In lending, the headline rate is only one part of the decision. The real outcome often comes down to strategy, timing, and how a structure performs over time.
If you’re reviewing a deal and unsure whether it stacks up beyond the surface, it’s worth having it assessed properly before making a decision.
For support with SMSF lending or finding the right finance structure for your situation, contact Harrison at [email protected], follow @hkwfinance on Instagram, or get in touch via the website.