Tightening credit market and HDTs or PITs
- Thread starter WASP
- Start date
I am in the process of applying for a new loan to build an IP purchased under the MGS Hybrid trust.
Mortgage broker said it shouldn't be a problem. He did get me a loan from ING bank for another IP I purchased last year also under the same Hybrid Trust.
He also mentioned the new RAMS (Under Westpac) also loans to properties under Hybrid trusts
Cheers,
Oracle.
Mortgage broker said it shouldn't be a problem. He did get me a loan from ING bank for another IP I purchased last year also under the same Hybrid Trust.
He also mentioned the new RAMS (Under Westpac) also loans to properties under Hybrid trusts
Cheers,
Oracle.
Hiya
I dont believe the structure is the issue, the fact that some lenders have gone by the wayside that used to like them is probably more of a symptom of the general lack of money.
I dont believe the structure is the issue, the fact that some lenders have gone by the wayside that used to like them is probably more of a symptom of the general lack of money.
comments below refer to low-docs in a tightening market
Currently we're hearing that the lenders want the trustee to be on the Loan (not a desired scenario in a HDT as I understand it).
On Loan Agreements have also been discussed (unsure of the validity of these at this stage).
Be interested to hear others opinions on the above
Currently we're hearing that the lenders want the trustee to be on the Loan (not a desired scenario in a HDT as I understand it).
On Loan Agreements have also been discussed (unsure of the validity of these at this stage).
Be interested to hear others opinions on the above
Agreed Redwing, several lenders (including RAMS) require the lender to be the borrower which removes the effectiveness of the HDT.
Many lenders wont consider trusts with lo doc loans either.
Many lenders wont consider trusts with lo doc loans either.
That's right Pete, if the Trustee Company is on the loan as well as the individuals then the interest should be divided as well which defeats the purpose of the negative gearing.
On-Loan agreements would be between related parties and are not advisable if you want full tax deductibility of the interest. The ATO would look at the legal owner of the loan with the Bank and allow the deductibility only to that entity.
Hi Redwing,
Between husband and wife you can choose who receives the deduction for the interest but when you have a trust party to the loan as well then it would need to be apportioned.
In a refinance situation if the hybrid trust was on the loan with mum and dad then one third of the units would be required to be redeemed at their market value creating a Capital Gains Tax problem for mum and dad.
This calculation would need to be assessed against the benefits of the lower interest rate for refinancing out of the financiers who are hiking rates.
Also we would not advise to prepare an on loan agreement, other accountants can do that if they like but they'd be taking a big tax risk as the paperwork would be a contrived related party transaction.
Between husband and wife you can choose who receives the deduction for the interest but when you have a trust party to the loan as well then it would need to be apportioned.
In a refinance situation if the hybrid trust was on the loan with mum and dad then one third of the units would be required to be redeemed at their market value creating a Capital Gains Tax problem for mum and dad.
This calculation would need to be assessed against the benefits of the lower interest rate for refinancing out of the financiers who are hiking rates.
Also we would not advise to prepare an on loan agreement, other accountants can do that if they like but they'd be taking a big tax risk as the paperwork would be a contrived related party transaction.
Hi Pat,
In the scenario where the trustee has to be on the loan, would the trust be able to borrow money against its equity in the IP and repay some of the original loan to you and what is the scenario there if possible?
You've originally borrowed money from the bank and bought units in the trust (the trust owes you) then you replace that loan to the trust with one from the bank (interest should still be deductible?)
Or is this out of context and I'm grasping at straws
I should've payed more attention in accounting
This current market situation must be playing havoc for those Investing in HDT's and into low-doc (or even no-doc) territory, or is it just me?
What is the solution......Just got a rate hike from RHG today, they are going up to 10.53%, or is there no solution with the HDT's; just grin and bear it at this stage of the game?
We have Buffers, but running on empty is not the time to be looking for a fuel station
Appreciate the comments from the brokers as they must be encountering this a bit in this market, however, Feel free to PM me, no one else seems to be playing ;o)
In the scenario where the trustee has to be on the loan, would the trust be able to borrow money against its equity in the IP and repay some of the original loan to you and what is the scenario there if possible?
You've originally borrowed money from the bank and bought units in the trust (the trust owes you) then you replace that loan to the trust with one from the bank (interest should still be deductible?)
If the Properties are held at various stages of time such as 2 years, 1 year etc and the CGT could be streamed to beneficiaries as well as the fact that Mum and Dad essentially are in the low income/tax bracket ala' Rixters posts what is the scenario therePat said:
Or is this out of context and I'm grasping at straws
I should've payed more attention in accounting
This current market situation must be playing havoc for those Investing in HDT's and into low-doc (or even no-doc) territory, or is it just me?
What is the solution......Just got a rate hike from RHG today, they are going up to 10.53%, or is there no solution with the HDT's; just grin and bear it at this stage of the game?
We have Buffers, but running on empty is not the time to be looking for a fuel station
Appreciate the comments from the brokers as they must be encountering this a bit in this market, however, Feel free to PM me, no one else seems to be playing ;o)
I'm very interested in this thread as I'm a PIT-no-doccer
Only reason I can't comment yet about tightening credit is because I'm not ready to purchase again at the moment; haven't applied for finance since Feb.
My rates are now above 10.5 also.
Hiya
If you can live with 70 % lvr no doc, thensub 10s are still available for trusts where the borrower mirrors title.
This works for PITs ( because the PIT creators seem ok with back end loan agreeements) but wont work for HDTs
ta
rolf
If you can live with 70 % lvr no doc, thensub 10s are still available for trusts where the borrower mirrors title.
This works for PITs ( because the PIT creators seem ok with back end loan agreeements) but wont work for HDTs
ta
rolf
As a follow up Pat, how would the ATO view a HTD with several properties in it with different lenders.
Lender A has the individual as the borrower.
Lender B has the trustee / trust as the borrower.
I certainly don't expect there would be a problem with the property held by Lender A, but what could happen with Lender B's property in this case?
I have seen cases where a clash of lenders and circumstances have led to this situation.
Lender A has the individual as the borrower.
Lender B has the trustee / trust as the borrower.
I certainly don't expect there would be a problem with the property held by Lender A, but what could happen with Lender B's property in this case?
I have seen cases where a clash of lenders and circumstances have led to this situation.
Hiya JIT
Not an exhaustive list, and not covering exceptions
CBA - no usually, they dont like the unit component
NAB yes
ANZ yes
Westpac ( only through biz banking , so no > than 80 %, no LOCs or offsets)
STG yes
AMP yes
Suncorp Yes
Adelaide Bank ( only through some mortgage managers)
Bankwest used to, but now they are not so sure
Citibank yes ( though we have yet to try them)\
Heritage yes
ING yes
ta
rolf
Not an exhaustive list, and not covering exceptions
CBA - no usually, they dont like the unit component
NAB yes
ANZ yes
Westpac ( only through biz banking , so no > than 80 %, no LOCs or offsets)
STG yes
AMP yes
Suncorp Yes
Adelaide Bank ( only through some mortgage managers)
Bankwest used to, but now they are not so sure
Citibank yes ( though we have yet to try them)\
Heritage yes
ING yes
ta
rolf
Hi Pat,
In the scenario where the trustee has to be on the loan, would the trust be able to borrow money against its equity in the IP and repay some of the original loan to you and what is the scenario there if possible?
You've originally borrowed money from the bank and bought units in the trust (the trust owes you) then you replace that loan to the trust with one from the bank (interest should still be deductible?)
If the Properties are held at various stages of time such as 2 years, 1 year etc and the CGT could be streamed to beneficiaries as well as the fact that Mum and Dad essentially are in the low income/tax bracket ala' Rixters posts what is the scenario there
Or is this out of context and I'm grasping at straws
I should've payed more attention in accounting
This current market situation must be playing havoc for those Investing in HDT's and into low-doc (or even no-doc) territory, or is it just me?
What is the solution......Just got a rate hike from RHG today, they are going up to 10.53%, or is there no solution with the HDT's; just grin and bear it at this stage of the game?
We have Buffers, but running on empty is not the time to be looking for a fuel station
Appreciate the comments from the brokers as they must be encountering this a bit in this market, however, Feel free to PM me, no one else seems to be playing ;o)
In this scenario it is a pure refinance and there is a Capital Gain assessed to the unitholder based on the Market Value of the property or properties at this time.
The Capital Gain cannot be streamed if there were units on issue, the Capital Gain must go to the Unitholders.
