Borrowing from yourself

One of the avenues we will discuss with our accountant this week, is taking out a formal loan for a property purchase, from one of our companies.

One con seems to be that the loan must be made at commercial interest rates.
Another is I don't know how the first mortgage being held by our company would effect using the property as equity for a future loan with a bank.


Pros include, we get all the tax deds, interest doesn't flow to a bank, and obviously our company can be more lenient with variations in repayments.

Has anyone done this, and can you advise of pro/cons.
 
If the company has a registed first mortgage then this will most likely be an issue with lenders, your company in this case would be a "lender of money".

I have only done unsecured loans from my company and or trust to myself.

Apart from the above, yes you would get the tax benifts and also your company then would have additional income.
 
One of the avenues we will discuss with our accountant this week, is taking out a formal loan for a property purchase, from one of our companies.

One con seems to be that the loan must be made at commercial interest rates.
Another is I don't know how the first mortgage being held by our company would effect using the property as equity for a future loan with a bank.

Couldn't you (at a future point in time when you're ready to darw equity) revalue the asset and get a loan wholly from the bank against that asset and re-pay the Co debt.

The Co could then do the same again, loan to you and off you go to buy another or add value or whatever.

The above of course won't necessarily work if you are looking to borrow from the Co and concurrently fund shortfall from a bank. As Evachange has mentioned the banks are unlikely to like playing second fiddle on the security side.

If it's your company........loan to your self unsecured if its cash you've got to splash. Not sure if you've got a property in that Co that you can draw equity from.

Also you may wish to check with your accountant whether it's more prudent/beneficial to loan to yourself personally or to a trust.



Pros include, we get all the tax deds, interest doesn't flow to a bank, and obviously our company can be more lenient with variations in repayments.

Has anyone done this, and can you advise of pro/cons.

I guess a more common way is for yourself to personally loan to a Co or a discretionary trust by using personal IP or PPOR equity. I am looking at just such a scenario for the future, so that I have funds approved on the equity asset and I can buy ca$h unconditional and have more decisive outcomes with negotiation by avoiding finance clauses.

I can then refinance later at my discretion against the asset in the trust.

Interesting thread, would be happy to hear MB's opinions
 
Thanks evachange. will add secured versus unsecured loan to list of things to discuss with acct.

Player, afaik the loan $$s could come from the trust or company. I am unsure on the mechanics at this point. It's just another risk management option to explore in a rising interest rate environment. Though I don't want to jeopardize using equity for future purchases, or complicate refinancing with a bank.

And there's a lot to be said for using as much OPM up front (90%+ bank loan)........then, only if the compost hits the fan, throw cash into an offset or redraw facility......save the ammo til you see the whites of their eyes kind of thing. Though why watch interest flow out the door to a bank, when it could stay in house.

JRC, that's an excellent tip about 7A. Will peruse that before seeing acct.
 
Top