Home Loans Under Trust Structure
Many property investors choose to use a trust to purchase investment properties due to the significant asset protection and tax benefits they provide. However, not all lenders are familiar with how to properly structure trust loans, which could result in missed opportunities for tax advantages.
What Do Lenders Look For?
When a lender evaluates a trust loan application, they conduct a thorough credit assessment to determine whether to approve the loan. Here are some key factors they consider:
-
Type of Trust: Different types of trusts are assessed in various ways. Some banks favour discretionary or family trusts, while others may be open to hybrid, property investment, or self-managed superannuation fund (SMSF) trusts.
-
Trust Credit History: The credit files of both the trustee company and the beneficiaries may be reviewed. Interestingly, trusts themselves can sometimes have a credit file, which lenders check for any previous loan applications or credit issues.
-
Trust Deed: The trust deed outlines the beneficiaries and the trustee, and lenders will ensure that the trustee has the legal authority to apply for loans on behalf of the trust.
-
Loan Structure: Some investors opt to have the loan in the name of the trustee or the director of the trustee company rather than the trust itself. This strategy is often used to capitalise on negative gearing benefits, particularly when using unit or hybrid trusts.
-
Beneficiaries: In certain cases, lenders may require all adult beneficiaries to act as guarantors. This can complicate the borrowing process, especially when there are multiple beneficiaries in a trust.
We Understand Trust Loans
At Avenstone, we know exactly what banks look for when it comes to trust applications. Our experienced mortgage brokers can help you navigate the complexities of trust loans to ensure you maximise your tax benefits and secure the best loan structure.
Call us today on (03) 9566 7247 or book a free 30-minute discovery call to speak with one of our brokers. Let us help you find the right loan solution for your trust.
What Additional Documents Do Banks Need for Trust Loans?
When applying for a loan under a trust, banks will typically require several specific documents to process your application. These documents include:
-
Certified Copy of the Stamped Trust Deed: This is essential to verify the existence of the trust and the specific terms outlined in the deed.
-
Certified Copy of the Company Constitution: Required if the trustee is a company, as it outlines the company's rules and structure.
-
Identification for Trustees, Directors, and Beneficiaries: Identification is needed for all individuals associated with the trust, including trustees, directors of the trustee company, and beneficiaries.
-
Tax Returns and Notices of Assessment for the Trust: Depending on the situation (e.g., low-doc or new trusts), these may not always be required, but they are often necessary for lenders to assess the trust’s financial history.
For a detailed list of required documents, contact us at (03) 9566 7247 or book a free 30-minute discovery call today.
Can Trusts Get Discounted Loans?
Yes, trusts can secure discounted loans! The key to getting your loan approved is knowing which lender is best suited to your specific trust type and proposed loan amount. It’s crucial to ensure the lender processes the loan as a residential loan, not a commercial one. Commercial loans often come with higher fees and interest rates.
Unfortunately, many lenders are unable to approve residential loans for trusts, which can leave investors wondering how to proceed when purchasing an investment property through a trust.
How Do Lenders View Trusts?
Lenders, including banks, often view trust loans as more complex and time-consuming than traditional loans. This is due to the legal intricacies and additional paperwork involved in approving a loan for a trust.
Here are some key challenges lenders face when dealing with trust applications:
-
Complexity: Trust applications require extra attention, often involving legal issues and a more extensive review process.
-
Lack of Understanding: Many bank managers, mortgage brokers, and credit staff are not well-versed in how trusts function. As a result, trust applications often get passed between departments, leading to delays and errors.
-
Limited Knowledge: Even bank managers may not be aware that their institution offers trust loans, as many banks have unclear or restrictive credit policies regarding trusts.
In fact, one of Australia’s major banks cannot process residential loans for trusts due to limitations in its computer system!
We specialise in trust loans and know exactly how to navigate these complexities. Contact us on (03) 9566 7247 or book a free 30-minute discovery call to find out which lenders will approve loans for your trust.
Why Don’t All Banks Lend to Trusts?
Not every bank offers loans to trusts, mainly due to the perceived legal risks and administrative complexities involved:
-
Legal Concerns: Some banks are concerned that trust loans could be unenforceable in the event of a default, especially if the borrower cannot repay the loan.
-
Taxation Concerns: The Australian Taxation Office (ATO) may alter its rulings on trusts, which could impact lenders who have already extended credit to trust borrowers.
-
Profitability: Trust loans are seen as less profitable for banks due to the additional work required in preparing mortgage documents and verifying the trust deed.
How Do Banks Get Around These Problems?
When a bank receives a trust loan inquiry, they often redirect it to their business banking department. While business banking staff may have more experience handling trust loans, this process comes at a cost:
-
Higher Interest Rates and Fees: Borrowers are typically charged higher rates and more fees through business banking, making it a more expensive option.
-
Slower Processing: Business banking departments are often slower than residential lending departments, and they may not offer a low-doc option.
-
Reduced Borrowing Capacity: Business banking loans tend to have stricter borrowing limits compared to residential loans.
At Avenstone, we work with lenders that offer lower fees, competitive rates, and faster approval processes. Let us help you secure the right loan for your trust.
Call us at (03) 9566 7247 or book a free 30-minute discovery call today to explore your trust loan options.
Do you have any questions?
We're here to help!
Do Lenders Charge Additional Fees for Trust Loans?
Yes, lenders typically charge additional fees for loans involving a trust. These fees cover the extra work involved in preparing the guarantee and indemnity documents, which must be signed by the trustee and, in some cases, the beneficiaries. On average, the additional legal fees range from $200 to $500 depending on the complexity of the loan.
Can the Loan Be in My Name?
Yes, it’s possible to structure the loan in the name of the trustee or the director of the trustee company, rather than in the trust's name. Here are a couple of common loan structures:
Loan Structure 1:
-
Borrower: XYZ Pty Ltd as Trustee for The Johnson Family Trust
-
Mortgagor/Property Owner: XYZ Pty Ltd as Trustee for The Johnson Family Trust
-
Guarantor: Sarah Johnson
Loan Structure 2:
-
Borrower: Sarah Johnson
-
Mortgagor/Property Owner: XYZ Pty Ltd as Trustee for The Johnson Family Trust
-
Guarantor: XYZ Pty Ltd as Trustee for The Johnson Family Trust
Remember, some lenders may not accept the second structure, so it’s essential to review these options with a mortgage broker or accountant to ensure compliance and optimise tax benefits.
For more information or to get assistance, contact us at (03) 9566 7247 or book our free 30-minute discovery call today.
Can I Sell My Property to My Trust?
Yes, you can sell property to your trust. If you're considering a low doc trust loan, you can declare your income rather than submitting tax returns as proof. However, only a few select lenders are willing to approve low doc loans for trusts, so it’s crucial to speak with us first.
Contact us at (03) 9566 7247 or book our free 30-minute discovery call today before applying for a low doc loan using a trust.
Are There Low Doc Loans for Trusts?
Yes, low doc loans are available for trusts! With a low doc loan, you can declare your income without needing to provide tax returns as evidence. However, not all lenders offer low doc loans for trusts. It's important to work with a mortgage broker who understands which lenders will consider these types of loans.
To find out which lenders will approve your low doc trust loan, contact us at (03) 9566 7247 or book our free 30-minute discovery call today.
What Is a Trust?
A trust is a legal arrangement that allows a person or company to hold assets on behalf of another person, family, or group. The individuals or entities benefiting from the trust are called beneficiaries. A trustee is responsible for managing and controlling the assets, and this role can be filled by a person or a company. The trustee must follow the rules set out in the trust deed, which also outlines how income or profits are distributed to the beneficiaries.
Benefits of Buying Property in a Trust Name
Purchasing property through a trust offers several advantages:
-
Tax Benefits: By distributing income to family members with lower taxable incomes, you may be able to reduce your overall tax bill.
-
Asset Protection: Holding assets in a trust can protect them in case of legal action or during a divorce. This can also keep assets secure from creditors.
-
Estate Planning: Trusts can make it easier to pass assets on to future generations while minimising taxes and avoiding lengthy estate disputes.
For more tips on investing using a trust, check out our trust information page.
Drawbacks of Buying Property in a Trust Name
While there are numerous benefits, buying property in a trust name can also present some challenges, especially when it comes to borrowing. Trust loans are more complex, and not all lenders are comfortable with trust structures. It’s important to understand the potential drawbacks and plan carefully to ensure the best possible financial outcome.
At Avenstone, we specialise in helping clients secure trust loans that maximise investment returns. We know how trusts work and which lenders accept them.
Contact us at (03) 9566 7247 or book our free 30-minute discovery call today to discuss how we can help you navigate the process.
Do Beneficiaries Need to Guarantee a Loan for a Trust?
In some cases, lenders may require all adult beneficiaries to act as guarantors on a trust loan. This requirement can complicate the borrowing process, especially if there are multiple beneficiaries. However, with the right support and advice, you can navigate these complexities and secure the best loan option for your trust.
At Avenstone, we specialise in helping individuals borrow money for their trust, ensuring all aspects of your trust loan are optimised for maximum returns.
Call us today at (03) 9566 7247 or book our free 30-minute discovery call today to speak with a mortgage broker who understands trust financing.
Apply for a Loan in a Trust
In some cases, lenders may require all adult beneficiaries to act as guarantors on a trust loan. This requirement can complicate the borrowing process, especially if there are multiple beneficiaries. However, with the right support and advice, you can navigate these complexities and secure the best loan option for your trust.
At Avenstone, we assist clients with borrowing through a trust. Our expertise in trust loans ensures that every aspect of the loan is tailored to help you achieve the best results for your investments. We know which lenders accept various trust types and can guide you through the entire process.
To explore your trust loan options, call us at (03) 9566 7247 or book our free 30-minute discovery call today.
Need Help with Loans Under a Trust Structure? We’re Here to Assist!
If you’re looking to secure a loan under a trust structure, we’re here to guide you through the entire process. Whether you're purchasing property in the name of a family trust, unit trust, or SMSF, our team of experts has the experience to help you navigate the complexities involved.
Call us on (03) 9566 7247 or book our free 30-minute discovery call today. Our specialists will ensure you get the best deal for your trust loan and help you understand all the legal and financial requirements for borrowing under a trust. Let us make your trust loan application as smooth and efficient as possible!
Years Experience
20+
in Residential & Commercial Banking