ANZ Loan Structure help please!

Hi, Many thanks in advance for your advice.

My husband and I recently bought our second IP and our broker steered us towards the ANZ Breakfree package as the best option for our current and future needs as we will have 3 loans within the next year. Curr Rate is 0.8% off svr (6.56%). Fee is $375pa.

Originally we wanted to purchase the property in our trust name (discretionary family trust) but realised it would be heavily neg geared + land taxed so we changed it to our own name. The broker checked with ANZ and said there would be no change to the loan structure or so we thought...

Our first IP is owned by our trust and is not currently financed. Now we have applied for a LOC in the trust name against this IP and ANZ won't let us put it in the breakfree package, even though we had to sign guarantor docs to say the debt was legally ours. They are saying the trust loan cannot be under the breakfree package. They want another annual fee of $150 for each of the trust loans (there will eventually be 2 loans)

Is there 'breakfree' experts out there please? Is this a new change or should the broker have known this would happen when we applied?

I'm after some advice on whether to just suck it up and accept the new ANZ offer or can I do better and refinance with someone who will mix our personal loan with the trust loan under one package (still with a good rate :D)
 
Find a different lender to finance the loc at competitive rates and preferably no annual fees then use ANZ for IP3. Or just cop the extra costs?
 
Hi, Many thanks in advance for your advice.

My husband and I recently bought our second IP and our broker steered us towards the ANZ Breakfree package as the best option for our current and future needs as we will have 3 loans within the next year. Curr Rate is 0.8% off svr (6.56%). Fee is $375pa.

Originally we wanted to purchase the property in our trust name (discretionary family trust) but realised it would be heavily neg geared + land taxed so we changed it to our own name. The broker checked with ANZ and said there would be no change to the loan structure or so we thought...

Our first IP is owned by our trust and is not currently financed. Now we have applied for a LOC in the trust name against this IP and ANZ won't let us put it in the breakfree package, even though we had to sign guarantor docs to say the debt was legally ours. They are saying the trust loan cannot be under the breakfree package. They want another annual fee of $150 for each of the trust loans (there will eventually be 2 loans)

Is there 'breakfree' experts out there please? Is this a new change or should the broker have known this would happen when we applied?

I'm after some advice on whether to just suck it up and accept the new ANZ offer or can I do better and refinance with someone who will mix our personal loan with the trust loan under one package (still with a good rate :D)

You've confused the terminology a bit there. It is the trustee that owns the property - is this a person or company?
 
Hi, Many thanks in advance for your advice.

My husband and I recently bought our second IP and our broker steered us towards the ANZ Breakfree package as the best option for our current and future needs as we will have 3 loans within the next year. Curr Rate is 0.8% off svr (6.56%). Fee is $375pa.

Originally we wanted to purchase the property in our trust name (discretionary family trust) but realised it would be heavily neg geared + land taxed so we changed it to our own name. The broker checked with ANZ and said there would be no change to the loan structure or so we thought...

Our first IP is owned by our trust and is not currently financed. Now we have applied for a LOC in the trust name against this IP and ANZ won't let us put it in the breakfree package, even though we had to sign guarantor docs to say the debt was legally ours. They are saying the trust loan cannot be under the breakfree package. They want another annual fee of $150 for each of the trust loans (there will eventually be 2 loans)

Is there 'breakfree' experts out there please? Is this a new change or should the broker have known this would happen when we applied?

I'm after some advice on whether to just suck it up and accept the new ANZ offer or can I do better and refinance with someone who will mix our personal loan with the trust loan under one package (still with a good rate :D)

I suppose a lot comes down to how long you have till settlement......and what ur stress tolerance levels are :)

Ta
Rolf
 
Now we have applied for a LOC in the trust name against this IP and ANZ won't let us put it in the breakfree package, even though we had to sign guarantor docs to say the debt was legally ours.
Does it mean the IP is in danger if you are sued for something else?
Or
Does it mean any lawsuits come through this IP can hit you personally?
 
Thanks for everyone's comments. To answer:

Terryw - The trustee is a ltd company of which we are the only directors, and ANZ wouldn't lend to the trust unless we signed guarantor docs (and got a signed legal advice form).

Rolf - The settlement time was another reason we ended up with the second IP in our name. We could see that the bank wasn't going to be able to approve the trust loan in time. The trust LOC is for the deposit to purchase IP3 which I am not going to start looking for until all this is sorted so plenty of time to investigate other options.

I am going to start calling some places tomorrow and anyone who offers a good deal with all our requirements will be on our shortlist. It appears some of the better deals are not with the banks and unfortunately do not go through brokers so I will have to do some legwork myself. I will post the outcome.
 
I am going to start calling some places tomorrow and anyone who offers a good deal with all our requirements will be on our shortlist. It appears some of the better deals are not with the banks and unfortunately do not go through brokers so I will have to do some legwork myself. I will post the outcome.

Do u know what you want in terms of your financing ? , and specifically why you need it ?, and specifically how this current round of financing fits into your future goals. Have have you mapped out your financing plan to match with your goals ?

Or,......... like > 95% of investors, we" make it up" as we go along, and then struggle when we get to IP number x, only to find out that some "simple" forward planning would comfortably got us to IP X +5.

If you know specifically what you want and why, and how its fits into your goals, then your chase will be much shorter, because your shortlist will be immediately reduced to 30 % of the open list, simply because lender X isnt a good fit for me right now, even though they have the best "deal", using that lender NOW rather than for IP 6 will paint me into a corner.

One obvious saving grace is that your serviceability is likely strong, since if u got the deal through with ANZ, pretty much anyone else will likely do it .

Im I'm posting this material specifically not targeted at you per se, but more so as a resource for others that will come in behind you in years to come.

ta

rolf
 
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Do u know what you want in terms of your financing ? , and specifically why you need it ?, and specifically how this current round of financing fits into your future goals. Have have you mapped out your financing plan to match with your goals ?
rolf

Hi Rolf, Thanks for that and I think we're somewhere in between. We're in a great equity position and an ok servicability position, but I am quite a low risk investor and won't commit a lot of our own income to servicing the loans. Hubby has been made redundant twice and it is on the horizon for me so we need to be careful.

In the short term(1-2 yrs) it is my intention to have 3 rental incomes paying two loans and as we get more equity/pay down the loans then add another property so there's 4 rentals paying 3 loans. I hope eventually the properties will be self sufficient and possibly pay me a small income (hence the discretionary trust).

I thought the breakfree package was a good option for multiple loans but as most of the properties will be owned by the trust I need a product which will cover us going forward.
 
Hi Rolf, Thanks for that and I think we're somewhere in between. We're in a great equity position and an ok servicability position, but I am quite a low risk investor and won't commit a lot of our own income to servicing the loans. Hubby has been made redundant twice and it is on the horizon for me so we need to be careful.

Makes absolutely perfect sense, you have identified one of the core drivers, as to the way we make decisions as human beings.

low risk would mean I would likely class you into the "risk averse" group of the average geared property investor. the traditional definition of risk averse is somebody that takes nil or only very moderate risk, which clearly isn't your situation, but in a property investing sense, you're at the lower risk tolerance end, and it is perfectly logical.


In the short term(1-2 yrs) it is my intention to have 3 rental incomes paying two loans and as we get more equity/pay down the loans then add another property so there's 4 rentals paying 3 loans. I hope eventually the properties will be self sufficient and possibly pay me a small income (hence the discretionary trust).

I thought you just said you had a low risk tolerance ? so when you say pay down your loan, Im sure you meant increase your cash buffer held in your offset account :)


I thought the breakfree package was a good option for multiple loans but as most of the properties will be owned by the trust I need a product which will cover us going forward.

at least on the surface it does make sense, to use the one annual fee for a bunch of loans, after all that is what most pro-packages are for. ANZ break free is a bit unique in that it doesn't allow more than five lines per package anyway, and so from that point of view is a bit of a dog.

why are we using a trust in what form of trust is it? personal or corporate trustee ?

In general, good financing strategy would usually not put a trust asset and a personal asset together with the same lender. It doesn't make good asset protection sense. It asset protection is an issue to you and your only using a trust is a tax management or estate vehicle, then it probably is an issue to you

Again not knowing the fine details of the numbers, in general an average valued property of 350 to 400, I would normally recommend no more than two or of these per entity or per lender, if it's your intention to hold these properties long long term.

Lending exposure considerations, land tax issues, asset protection needs etc tend to grow over time, and what seems like a sensible amount of asset value in a single trust today, is very likely not to be so future.

back to you, this is becoming a very interesting thread, because it provides some real-life situations that everybody can benefit from.

Thanks

Rolf
 
Thanks for everyone's comments. To answer:

Terryw - The trustee is a ltd company of which we are the only directors, and ANZ wouldn't lend to the trust unless we signed guarantor docs (and got a signed legal advice form).

Rolf - The settlement time was another reason we ended up with the second IP in our name. We could see that the bank wasn't going to be able to approve the trust loan in time. The trust LOC is for the deposit to purchase IP3 which I am not going to start looking for until all this is sorted so plenty of time to investigate other options.

.

Sounds like it is a complicated set up. Does your trust deed allow the trust to lend money to the beneficiaries?
 
Signing a directors guarantee for a family trust structure kinda defeats the entire purpose of asset protection in the first place....why bother? If the family trust had an unencumbered property then that would be a different story...

Otherwise you could just use a unit-trust structure to get negative gearing benefits since you won't get asset protection with the family trust anyway.
 
Does it mean the IP is in danger if you are sued for something else?
Or
Does it mean any lawsuits come through this IP can hit you personally?

A personal guarantee is when X guarantees a loan in the name of Y. If Y doesn't pay X has to. If Y is sued then X will be affected because Y won't be able to pay the loan. But if X is sued then Y is safe - although if X goings down then the terms of the loan may be breached as there would be no guarantee left.
 
Because if the trustee directors go bankrupt this would void the guarantee and can breach the terms of the loan agreement, leading to a sale of the security. Isn't the whole purpose of asset protection to 'protect the asset'?

If that did happen assets of the trust couldn't be used to satify the bankrupt's creditors.

If would also be possible to just substitute guarantor.
 
Signing a directors guarantee for a family trust structure kinda defeats the entire purpose of asset protection in the first place....why bother? If the family trust had an unencumbered property then that would be a different story...

Hi Aaron, you got it, the trust has an IP which is not currently financed and we are wanting to use the equity as the deposit for another IP which will also be owned by the trust. We are going to try and keep the trust +ve so we can benefit from the distributions to the lower income person. The -ve gearing aspect was one of the main reasons for making the personal asset personal :).

Rolf - Yes we have an offset into which we save all our pennies :). The loan is I/O.

All - Is there any financial institution which won't require a guarantor for a trust loan?? After all, it's our family trust, we are directors of the corporate trustee so in the end it's our debt which we are paying and which we are liable for under all circumstances (yes, including bankruptcy).
 
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All - Is there any financial institution which won't require a guarantor for a trust loan?? After all, it's our family trust, we are directors of the corporate trustee so in the end it's our debt which we are paying and which we are liable for under all circumstances (yes, including bankruptcy).

Its actually Not your debt :)

I know yes it is, but remember the same "space" of different entity


best of luck :) finding a lender that will provide a limited recourse loan.

We have had them accepted rarely where the income from the trust was so large that the thing was 2 x self servicing even in the lenders numbers.

BUT, there is more to the Directors guarantee than is obvious.

It's not really about the trust not being able to pay its debtsable to pay its debts and the directors then having to cover the debt.

More about making sure that changes that changes in directorship and things like that don't happen easily...............get it :)

lenders that will have half a brain, will ask for a fixed and floating charge a registered mortgage debenture on the assets of the trustee company......... what this does, for this purpose is to stop major changes to the structure of the company without the consent of the lender.

If you do get to a point of being able to put something through a limited recourse loan, fully expect the funder to request a fixed and floating charge on the trustee.

I know I'd rather prefer the personal guarantee................

As the old Castrol ad used to say, Oils aint Oils, and loans arent loans :)

Thanks

Rolf
 
It's not really about the trust not being able to pay its debtsable to pay its debts and the directors then having to cover the debt.

More about making sure that changes that changes in directorship and things like that don't happen easily...............get it :)


I know I'd rather prefer the personal guarantee................

As the old Castrol ad used to say, Oils aint Oils, and loans arent loans :)

Thanks

Rolf

I don't think it's likely that we will change the directors of the corp trustee, it's only my husband and I and even if that were to go south, we would remain directors to administor the trust for our kids so I also think the guarantee is probably the best way to go for these loans :D
 
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