Unit trust home loan
- Thread starter hello1234
- Start date
Hi All,
Does anyone know of banks which can provide home loans in personal names but with the title of the property in a unit trust (with a corporate trustee)?
I only know CBA so far...
Thank you.
Trusts are not legal persons so they cannot hold titles. A trust is a legal relationship between a trustee and the beneficiaries. Title in company name with loan in third party unit holder name is what you are after.
To answer your question - St George are good at this sort of thing. I have one in process right now. other banks ANZ, NAB, CBA are the main ones with a few of the smaller lenders too.
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Of course the Trust wont own a "home". That implies the owner and those that reside are the same. A trust isn't a person so cant reside. There are some tax issues that mean a trust shouldn't own the family home. Even if the family pay rent some concerns can occur (Jandmoor Decision)
A trust cannot own a home as such as it is not a person. It cannot access the CGT MR exemption or the PPOR land tax exemption (in most states).
Typically the loan will be a investment loan and not an owner occupied home loan. The UNITHOLDERS in the trust will borrow personally. The lender will want them to give guarantees in their capacities as Directors of the Trustee Company. They borrow to buy units in the trust. (The units issued in same % as the loan. The trust units will give them entitlement to a fixed share of trust income. (ie 50/50) Hence the trust will be +ve geared but the unitholders get their share of that income then personally deduct loan interest and borrowing costs to result in a possible -ve gearing position.
A trust cannot own a home as such as it is not a person. It cannot access the CGT MR exemption or the PPOR land tax exemption (in most states).
Typically the loan will be a investment loan and not an owner occupied home loan. The UNITHOLDERS in the trust will borrow personally. The lender will want them to give guarantees in their capacities as Directors of the Trustee Company. They borrow to buy units in the trust. (The units issued in same % as the loan. The trust units will give them entitlement to a fixed share of trust income. (ie 50/50) Hence the trust will be +ve geared but the unitholders get their share of that income then personally deduct loan interest and borrowing costs to result in a possible -ve gearing position.
Hi All,
Does anyone know of banks which can provide home loans in personal names but with the title of the property in a unit trust (with a corporate trustee)?
I only know CBA so far...
Thank you.
Pretty much a hybrid trust
Normally the big banks will do them + St George, AMP ( AMP has sort of pulled back recently on hybrid tho) etc ...; some on a case by case basis based on the strength of the deal and the trust deed wording...
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Pretty much a hybrid trust
Normally the big banks will do them + St George, AMP ( AMP has sort of pulled back recently on hybrid tho) etc ...; some on a case by case basis based on the strength of the deal and the trust deed wording...
Mick, it's quite different from a Hybrid trust...
quite a few lenders will do the third party guarantee if the directors of thetrutee are also the unit holders - garden variety stuff
LMI is a little more problematic,but still very placeable
ta
rolf
LMI is a little more problematic,but still very placeable
ta
rolf
Garden variety maybe but still each time I send one in with extensive notes they invariably come back with the structure changed to the trustee as borrower. Arghhh.
Structure yes. But loan in different name to owner no.
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with the right BDM support Macq will do the personal borrowing of unit holders with a security guarantee from trustee as long as the directors of the trustee are the same as the unit holders
Unless there has been a recent change
ta
rolf
Unless there has been a recent change
ta
rolf
Rolf...are you able to PM me some BDM names? Nobody in their legals seems to know how to do it
Macquarie was burnt by HDTs and they don't want to go there at the moment. It might be possible to sneak one past them, but they're really not the right choice for this type of structure.
Pretty much a hybrid trust
.
Hi Mick, my understand is, unit trust does not necessary a hybrid trust. Is this not correct?
yup. Different things.
Totally different but from a borrowing perspective loan in the name of unit holder while title in name of trustee for both. I think this is what concerns lenders the most rather than the terms of the deed.
If they sat and gave it 2 seconds thought they really should be more than happy with this structure as they have an unlimited guarantee from a full recourse loan to personal borrowers as well as the mortgage over the property and all assets of the trust. Game on.
Hi guys
In addition to the question in the original post I wanted to ask whether the following can work as well / instead / better or worse:
- can the title AND loan be the in name of the Pty Ltd Trustee company (as a trustee for a UT) with personal guarantees by the two directors and unitholders?
- what are the advantages / disadvantages in doing it one way or the other (i.e. one being: title in company name, loan in director's names, second being title and loan in company name, backed by personal guarantees of directors / unitholders).
*pls note: assuming said company is non trading / has no income
Many thanks
In addition to the question in the original post I wanted to ask whether the following can work as well / instead / better or worse:
- can the title AND loan be the in name of the Pty Ltd Trustee company (as a trustee for a UT) with personal guarantees by the two directors and unitholders?
- what are the advantages / disadvantages in doing it one way or the other (i.e. one being: title in company name, loan in director's names, second being title and loan in company name, backed by personal guarantees of directors / unitholders).
*pls note: assuming said company is non trading / has no income
Many thanks
Yes.
The trust will then claim all the deductions for interest. If the income is not enough to cover expesnse there will be a loss which will be either trapped in the trust or which could be used to offset other income of the trust - ie negative gearing.
If the unit holders borrow to buy they units they then get to deduct the interest. If there is a short fall of income then the unit holders can negative gear reducing their other income.
