If you buy an option over a property, then you can lodge a caveat on the title. This should prevent them from selling or mortgaging without your consent.

However, the bank can still foreclose on the property if they fail to pay their mortgage. Maybe you could ask to get copies of their monthly statements to make sure they keep paying, and maybe you could ask that you pay your rent directly into their mortgage.

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Yes, put a caveat on quickly while you sort this out. You will be able to do this as you have a family law matter. A caveat costs about $100 to put on, but you may need a solicitor if you do not understand what you are doing.

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Keep em coming Peter!

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Let me elaborate.

IO = Interest Only

100% offset account is a savings account linked to the loan. Money in the savings account is offset against the loan saving you interest.

eg. if you had a loan of $100,000 and $10,000 in the savings account, you would only be paying interest on $90,000 of the loan.

So having a 100% offset account and paying extra money in there would be the same as paying the money off the loan – same in terms of interest charged.

But there is one important difference. If you pay off an investment loan and redraw some money for non-investment purposes, then the extra interest on this withdrawal will not be deductible. Whereas if you were using a IO loan with offset, it would. This is because no money is paid off the loan, so withdrawing from the savings account will not be new borrowings.

But…. You will need to be discliplined. If you see all that extra cash sitting in a savings account, some people would be more inclined to spend it.

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You shouldn’t have any named beneficiaries in a trust, or the lenders may want a guarrantee from them. Seen this happen this week with RAMS. Man set up a trust, then changed the trustee to his mum, but he was a named beneficiary so the lender has asked for guarrantees from him as well as the mum.

From what I have seen, it is easier to just buy a new trust deed. Costs for changing it can be expensive as a solicitor has to review the document. If the trust already owns things, this may create problems too.

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What about keeping a certain amount in your account. If they want to see deposit (usually don’t these days), then show them this, but you can still borrow money from elsewhere. This may be hard to do if you want to use all your money for deposits, but it will also act as a buffer if things go wrong.

What about increasing the loan on your PPOR instead of selling?

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Don’t worry too much Anita. A hybrid may have saved you a little in tax however. Still better in the long run than holding them in your own name.

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Hi MJ

This is a complex area which I do not understand. The area I was thinking of is Division 7A loan agreements. See http://www.lawcentral.com.au

Froma brief look, it may be only problematic if your company lends money to the trust and this trust later lends money to an individual.

Without these agreements, any money lent may be deemed a dividend, which may result in tax having to be paid.

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If you have no other benefificaries with lower tax rates, then you can distribute to a company which will pay tax at 30%. Company can then hold the money and distrbute it to shareholders, or lend it out to the turst. But there are a whole series of rules relating to this, so you had better discuss it with your accountant.

With most trust deeds, you can set up a company down the track it and will be a beneficiary if one of the trustees has a role in the company – director, shareholder etc. So you may not have to set one up initially.

And the company does not have to be trustee for you to distribute to. In fact, it may be better not to for asset protection reasons. What if you build up a substantial amount and the trust is sued?

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