Borrowing for a Unit Trust Structure
- Thread starter Terryw
- Start date
Thanks Richard.
I assume the lenders would want a guarantee from each unit holder. Years ago I did a loan for a woman with bad credit, she had her mum trustee with her sole unit holder. The bank didn't ask her to guarantee the loan - but I think this was just because it did not read the deed.
It is very worrying to buy using this structure as what happens if the finance drys up in the future. The person would be stuck and unable to increase the loan or move lenders.
I assume the lenders would want a guarantee from each unit holder. Years ago I did a loan for a woman with bad credit, she had her mum trustee with her sole unit holder. The bank didn't ask her to guarantee the loan - but I think this was just because it did not read the deed.
It is very worrying to buy using this structure as what happens if the finance drys up in the future. The person would be stuck and unable to increase the loan or move lenders.
Hi TW
this is the case to some extent with some HDT borrowers, with many lenders no longer wanting them due to the sausage factory processing systems no longer accomodating them.
ta
rolf
this is the case to some extent with some HDT borrowers, with many lenders no longer wanting them due to the sausage factory processing systems no longer accomodating them.
ta
rolf
Hi RT, RL and Redwing
I think Unit trusts are the best structure available for investing in property - except for the finance side of things.
My reasons:
- secrecy of who owns what units - not publically searchable like a company
- not regulated by ASIC or corporations act (except for the trustee company),
- ownership of units can easily be changed,
- no stamp duty on transfer of units (in most instances),
- units can be held by separate discretionary trusts
- units can be redeemed by trustee and trust converted into discretionary without change of legal ownership,
- can qualify for land tax tax free thresholds in some states,
- good for JVs because of the fixed entitlements and all the above reasons.
The only problem is finance!
I think Unit trusts are the best structure available for investing in property - except for the finance side of things.
My reasons:
- secrecy of who owns what units - not publically searchable like a company
- not regulated by ASIC or corporations act (except for the trustee company),
- ownership of units can easily be changed,
- no stamp duty on transfer of units (in most instances),
- units can be held by separate discretionary trusts
- units can be redeemed by trustee and trust converted into discretionary without change of legal ownership,
- can qualify for land tax tax free thresholds in some states,
- good for JVs because of the fixed entitlements and all the above reasons.
The only problem is finance!
Yes a personal guarantee must be given....it can't just reply on the loan/deal it self...also the guarantee property must be acceptable as well ..ie Residential or term deposit
Regards
Michael
It depends on the security/ guarantee; but it doesn't need to be from everyone...either from the unit holder or director-
Regards
Michael
My general rule of thumb..
*** if the set up is basic and straight forward, min paper work and less then 3 beneficiary + the beneficiary are personally "related" ( ie not related by business connection" --- then it;s a deal i would suggest for the Big 4 banks + another well known bank; of course as long as the deal is do-able with these baks
*** If the set up is slightly more complex, involves multiple unit/trust anbd company, more then 3 beneficiary OR no connections then i would be more inclined to recommended some selective bunch of smaller lenders that i have great dealing with...def not the BIG 4 - as they will charge extra, take over 1 month to get anything official approved etc and ask for a truck load of paper work...
Regards
Michael
what lenders would you use if there were 2 beneficiaries (not related) and the 2 beneficiaries were the directors of the corporate trustee? Would you still use the big 4 in this case? and also, is it okay for the banks if you have discretionary trusts as unit holders instead of the individuals?
also, is it possible for the two individuals to borrow to buy the units in the unit trust, thereby effectively creating a negative gearing scenario?
thanks,
also, is it possible for the two individuals to borrow to buy the units in the unit trust, thereby effectively creating a negative gearing scenario?
thanks,
Hi KB
Many lenders will do a Unit trust with a corp trustee.
Typically,the most common use of a unit trust is where the unit holders arent related.
The disc trustees holding the units would need to provide a guarantee if not already captured elsewhere in the transaction
ta
rolf
Many lenders will do a Unit trust with a corp trustee.
Typically,the most common use of a unit trust is where the unit holders arent related.
The disc trustees holding the units would need to provide a guarantee if not already captured elsewhere in the transaction
ta
rolf
thanks rolf,
you can still borrow 90% though for a purchase through a unit trust?
also do banks allow borrowing to buy the units in the unit trust, so that one can effectively negative gear the property bought by the trust?
you can still borrow 90% though for a purchase through a unit trust?
also do banks allow borrowing to buy the units in the unit trust, so that one can effectively negative gear the property bought by the trust?
Some even to 95 %
And yes, you can have the loan in a personal name with a guarantee from the trust.
Obviously, not every lender will, but some still do
t
arolf
