loan with trust structure

[bonanzawealth]

As good as trust structure offers, wouldn't it be more difficult to acquire bank loan if trust is used? I mean not all the banks do trust so this will minimize the option available.

What are your thoughts, brokers?
Thanks lads

 

[Jamie M]

Depends on the trust - most will lend to family/discretionary without too much hassle.

Hybrid and the rest - yuck.

Cheers

Jamie

 

[Deltaberry]

Not a big deal. Most do. Just a matter of providing more documents

If they didn't they'd be ruling themselves out with a lot of bigger clients

 

[Marty McDonald]

Family trusts - with mum and dad as directors of the corporate trustee and as guarantors is pretty straightforward and lots of options but a few of the majors say they won't do corporates trustees through the normal channels. There are ways around this if you just have to be with A or W.

Hybrids - I have done a few lately with personal name borrowers and trustee as owner but you are limiting your options with them.

In summary there is more paperwork and hassles in general and watch out for the extra costs such as NSW mortgage duty (not exempt if not a natural person), land tax and accountant / legal costs for the trust deed and annual tax returns / ASIC fees etc

 

[Peter_Tersteeg]

The right trust structure will depend on what you're doing, what your goals and exit strategies are. Family trusts are great, but a unit trust might be better for unrelated parties (possibly with family trusts built in as well). There's so many structural options that you do need to get an understanding of how trusts work, and you need to get proper advice.

A broker who's got a good understanding of trusts can certainly give you some guidance on what sort of questions to ask, but you still need to get the right advice from an accountant and lawyer as appropriate.


As for which are easy to lend against...

Discretionary (family) trusts are a well understood entity by the banks. These are rarely a problem and the assessment criteria or results isn't much different from a regular purchase.

Unit trusts are a bit more complicated and have a few quirks and restrictions, but usually not a major issue. The hard part tends to be getting the lender to understand the overall structure, not the trust itself. There are a few lenders that won't go there.

Hybrid trusts are very difficult these days. Most lenders won't touch them because they feel the represent a lot of risk. That in itself says quite a bit.

 

[Rolf Latham]

Be aware that a dt can put a big dent into servicing due to the reliance of negative gearing for many lenders calculators

Get your broker to map this forward for u

Ta
Rolf

 

[Doons]

I refinanced a Hybrid discretionary trust last year. At the time the only bank that would consider the refinance was Bank West.
I have found that many banks say they 'do trusts' even though at the time I advise them that its a HDT (the general mtge staff just don't understand), then once their sols get the documents they pull out.
So be careful with your structure, get proper advice.
Kindest
Doons

 

[bonanzawealth]

I can understand the long term benefit for having a trust structure. Looking at which type of trust to use, it seems that more investors use HDT which is one that is less favorable in lender's eyes.

My question for you, great brokers, from your own experience in having multiple IPs, is having trust has prevent you in getting better home loan deals?

Is the benefit of trust comparable to the cost and losing the opportunity to get ahead?

 

[Marty McDonald]

If you are not at / close to your NSW land tax threshold already and are buying in NSW I would avoid.

 

[Corey Batt]

I can understand the long term benefit for having a trust structure. Looking at which type of trust to use, it seems that more investors use HDT which is one that is less favorable in lender's eyes.

My question for you, great brokers, from your own experience in having multiple IPs, is having trust has prevent you in getting better home loan deals?

Is the benefit of trust comparable to the cost and losing the opportunity to get ahead?

I would say a tiny minority of investors use HDT's, the majority is a healthy mix of discretionary and unit trusts.

The main negatives from trusts can be a limitation of the lenders which will accept them, and potential servicing issues. For some people the negatives are negligible because their income positions are strong, but I have seen cases where borderline scenarios can fall flat when a trust is added into the mix.

Form a relationship with a savvy investment finance broker who can give you advice on how a trust may impact your borrowing potential. From there you can weigh up the benefits/negatives of using trusts for your portfolio.