IP finance

[Aardvark]

I'm hoping someone can point me in the right direction regarding a mortgage broker or lender. We (my wife and I) own our own home valued 457K, with mortgage of 360K and a redraw facility containing approximately 100K - leaving outstanding mortgage of 260K.

I early 80K pa. My wife is at home with 3 small children and gets a smallish amount of Family tax benefit from the govt.

I'm eyeing an investment property which is a house that has been turned into 3 units ( council approved) with current rental return of $630pw. Asking price is 'offers over 399K', but has been on the market since Feb so probably no more than $399K. Property will require about 20K work (re-roof and some outside areas).

Im having difficulty getting finance for this loan as it is 3 units, and despite the high return the majors seem reluctant. I have a friend who is a broker (works for Ozzie) and he thinks he may be able to do it with 12K mortgage insurance.

However, it would be nice to keep the 12K if anyone has a better solution. Also, I would like to buy the property in the name of our family Hybrid Trust as it is around neutral/slightly + geared. But I'm told lenders dont like lending to Hybrid Trusts... is this the case and can anyone suggest an exceptional broker or alternative solution?

 

[Terry_w]

I'm hoping someone can point me in the right direction regarding a mortgage broker or lender. We (my wife and I) own our own home valued 457K, with mortgage of 360K and a redraw facility containing approximately 100K - leaving outstanding mortgage of 260K.

I early 80K pa. My wife is at home with 3 small children and gets a smallish amount of Family tax benefit from the govt.

I'm eyeing an investment property which is a house that has been turned into 3 units ( council approved) with current rental return of $630pw. Asking price is 'offers over 399K', but has been on the market since Feb so probably no more than $399K. Property will require about 20K work (re-roof and some outside areas).

Im having difficulty getting finance for this loan as it is 3 units, and despite the high return the majors seem reluctant. I have a friend who is a broker (works for Ozzie) and he thinks he may be able to do it with 12K mortgage insurance.

However, it would be nice to keep the 12K if anyone has a better solution. Also, I would like to buy the property in the name of our family Hybrid Trust as it is around neutral/slightly + geared. But I'm told lenders dont like lending to Hybrid Trusts... is this the case and can anyone suggest an exceptional broker or alternative solution?

You should possibly get some legal advice first, particularly on wanting to purchase it in the trust. Banks don't have issues with trusts in general, but if you want the loan in one name and the ownership in another this will create difficulties.

It would be good for you to get some tax strategy advice too.

 

[Aaron_C]

Aadvark - easy done.

3 units? No sweat, plenty of lenders will do this.

Hybrid Trust? A bit harder but still possible.

Looking at your numbers I don't understand why you have to pay LMI???

 

[Peter_Tersteeg]

However, it would be nice to keep the 12K if anyone has a better solution. Also, I would like to buy the property in the name of our family Hybrid Trust as it is around neutral/slightly + geared. But I'm told lenders dont like lending to Hybrid Trusts... is this the case and can anyone suggest an exceptional broker or alternative solution?

Without knowing all your financial circumstances it's difficult to determine if you can get this done without mortgage insurance. This aspect of the deal is reasonably straight forward, so I suspect if your friend (whom I presume you've disclosed everything to) says you will need to pay LMI, then you probably do.

Very few lenders are okay with HDTs, so if you go down this path you will be limiting your options considerably. What are your actual reasons for specifying a HDT? It could be that a regular discretionary trust will meet your requirements just as well (if not better), as well as give you more options which are likely to cost less.

 

[Aaron_C]

Why would he need to pay LMI if he has 100k redraw and the new property is only 400k?

 

[Shahin_Afarin]

HDT and LMI is a tough task. HDT and sub 80% LVR no issues but limited range of lenders - Suncorp are my favourites in this space.

Are the 3 units self contained? Do you have DA for subdivision?

 

[Rolf Latham]

Also, I would like to buy the property in the name of our family Hybrid Trust as it is around neutral/slightly + geared. But I'm told lenders dont like lending to Hybrid Trusts... is this the case and can anyone suggest an exceptional broker or alternative solution?

If a property is close to neutral, dont go near a HDT, if you really MUST go trust a vanilla DT with and 90 % lend with 3 units on one title wont be hard.

The longer term finance implications for a HDT arent great, not because there is an issue with the product/ structure per se, but because of the 3 ring circus attitude most lenders and "all" mortgage insurers have taken to them.

Just because you have a trust already in place, doesnt mean you have to use it. A new DT with your exising corporate trustee (assumption) wont cost a lot.

ta
rolf

 

[Peter_Tersteeg]

Why would he need to pay LMI if he has 100k redraw and the new property is only 400k?

Probably because I missed the comment about the redraw, but you're right. This can likely be done without LMI.

 

[Aardvark]

The units are all self contained and there is no DA for subdivision.

I thank everyone for their strong recommendation to speak with an accountant - I struggle to understand all the implications of the HDT (or family/discretionary either, for that matter). There seems to be a lot of differing opinon on trusts - even with accountants.

Our existing HDT has about 80K of existing losses in it and my thinking was to use these to offset any positive gearing from the property.

I neglected to mention that we're trying to hold onto as much of our offset account monies as possible to go towards renovations on our PR (w/o incuring LMI).

 

[Shahin_Afarin]

No DA for subdivision will be a problem. Completely circumstantial and best to get your banker or broker to have a closer look at the entire application and then comment from there. On the face of it your best bet is to order an upfront val and have credit verify this upfront before the application is submitted. You will be extremely limited by the number of lenders who will have appetite for the security type and HDT combination. Best to do the hard work upfront before application submission.

 

[Terry_w]

The units are all self contained and there is no DA for subdivision.

I thank everyone for their strong recommendation to speak with an accountant - I struggle to understand all the implications of the HDT (or family/discretionary either, for that matter). There seems to be a lot of differing opinon on trusts - even with accountants.

Our existing HDT has about 80K of existing losses in it and my thinking was to use these to offset any positive gearing from the property.

I neglected to mention that we're trying to hold onto as much of our offset account monies as possible to go towards renovations on our PR (w/o incuring LMI).

You should consider maybe using a structure involving a discretionary trust whereby you may be able to distribute profits from that one to the HDT to offset losses. Speak to your adviser.