Properties in Hybrid trusts may need to be sold to release equity

[Terry_w]

Terry as we're both aware, most HDT lending structures require the loan to be in the name of the individual (not the trustee). This unusual loan structure usually the giveaway to the lender that it's a HDT.

If you put the loan in the name of the trustee and don't say otherwise, some lenders may not look too closely and would assume it's a discressionary trust, is within policy and simply go with it.

If they vet the trust deed properly, their legal person would likely pick up that it's a hybrid trust and make this part of their report. If this is outside the lenders policy then no amount of legal or tax arguments are going to save the deal from a decline.

Hi PT

I am really not sure about all this. I haven't done a loan for a HDT for about 10 years and haven't had any clients with one recently so I have no experience.

But, a person may want to use a Unit Trust with the loan in the name of the unit holder so they can claim the interest. This seems to be almost as difficult as a HDT.

I really think the problem is the third party lending and not the deed itself. But I am unable to confirm this as the only people we can talk to at a lender is the non legal people who have no idea about trusts in general so their automated response is - we don't lend to Hybrid trusts.

The only real way of know is to submit a deed and to have it vetted. But there also appear to be lawyers in the banks who do not understand trusts or don't read the deeds as I have had some passed when I thought issues would pop up - no guarantees asked from the unit holders for example.