Trusts…. Can they make it difficult to borrow $$

do a google search for a book called trust magic
or
go to online shop on this forum web site and select all products
look for
WealthGuardian (Revised & Updated!)

Some lenders will not lend to trusts and have problems lending to hdt type trusts

Brett Duxbury
Duckster Financial Services
Mortgage Broker
http://www.ducksterfinancial.com

Comments are of a general nature and may not be relevant to your individual circumstances. If you intend making any investment, financial or taxation decision you should consult a professional adviser.

Using a trust generally makes no difference at all to the ability to borrow. The only exception that I can think of is ANZ’s Low Doc loan which is not available to companies or trusts.

There can be some problems when using a Hybrid Trust. This would only arise if you have a corporate trustee as the title will be in the company name, but the loan needs to be in a individual’s name. SO a third party guarantee is involved. Not many banks would do this. If the trustee and the unit holder is the same, then there should be no problem.

Some lenders can also have problems with unit trusts.

I don’t think you will get an easier book on trusts than ‘Trust Magic’. Start with that and then start surfing the net. Another one accountant’s use is “Trust Structures Guide”. Costs about $350 though!! But it is available in some university libraries. This is probably the best book on the different trust structures with flow charts helping to explain which one you might need. But it is not written from a property point of view. More business orientated.

Terryw
Discover Home Loans
[email protected]
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Admitedly Accountants have little knowledge of lending or loan structuring but in saying that we have never had any problems in placing a deal within a Trust Structure.

This goes for full documented / lodoc / nodoc or Commercial. No tall lenders like Trust structures usually because the local manager does not understand them but a good MB will be able to work his way through the finance minefield for you.

Which State are you in ? as can always refer you to a top Trust Accountant on the Gold Coast. Think of my Australian clients have used him as he lectures around the Country on Trusts and Asset protection.

Cheers

Richard Taylor
Residential & Commercial Finance Broker.
Licensed Financial Planner. Ph: 07 3720 1888
[email protected]
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I agree, it doesn’t really make any difference having a trust.

Terryw
Discover Home Loans
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Hi Mat,

In my experience, the major Banks don’t seem to have any problem with Trust structures (even those with corporate trustees) – it’s just a matter of having a sufficient paper-trail and being able to give them what they want to approve your loan. Unfortunately, we don’t write the rules, but if you know what the rules are, you can play them to your advantage.

Without being biased, Steve’s DVD entitled “How to get the banks to say Yes!” is brilliant. I would recommend that you buy, beg, or borrow a copy as I think it will certainly help you.

Also I believe “Wealth Guardian” is also very good – we haven’t actually got it, but have a very very good accountant who deals with all of this kind of stuff. I can put you in touch with them if you are in NSW and want some help in this department.

One other tip: If you have a corporate Trustee, get your accountant to write a letter certifying that the company doesn’t actually trade (ie it’s sole responsibility is as the Trustee of the Trust) – for some reason, this seems to smooth a few ruffled features, probably as the company isn’t going to be open to other losses or legals.

Cheers,
Scott M. [smiling]

—
Scott Matthew
Property Investor & Director,
Show The World Internet Solutions
http://www.showtheworld.com.au

Comments are of a general nature and may not be relevant to your individual circumstances. If you intend making any investment, financial or taxation decision you should consult a professional adviser.

Hi again Mat,

We use Neville Halloran from Business Accountancy (http://www.businessaccountancy.com.au) for one of our businesses in Walcha (northern NSW).

Neville is based in East Brisbane, and knows his stuff & is very helpful.

Hope this helps.

Cheers,
Scott [thumbsupanim]

—
Scott Matthew
Property Investor & Director,
Show The World Internet Solutions
http://www.showtheworld.com.au

Comments are of a general nature and may not be relevant to your individual circumstances. If you intend making any investment, financial or taxation decision you should consult a professional adviser.

Good tip – however we have specifically been asked for this in the past. Perhaps we need a better Mortgage Broker! [biggrin]

I wouldn’t discount using the corporate trustee first up – it’s easier to set it up correctly first time around, and it gives you more flexibility down the track re asset protection…

Cheers,
Scott [strum]

—
Scott Matthew
Property Investor & Director,
Show The World Internet Solutions
http://www.showtheworld.com.au

Comments are of a general nature and may not be relevant to your individual circumstances. If you intend making any investment, financial or taxation decision you should consult a professional adviser.

Hi,

Trusts are generally seen as an attractive way to control wealth without owning it.

However, since a trust is usually set up just prior to buying, it often lacks the necessary financial history to properly comfort a lender (such as 2+ years of financial statements).

Even if a relatively low LVR is sought, the bank will want some surety that the loan can be repaid – or that someone will repay it should the trust default.

That is wht lenders typically require a guarantee from the Trustee(s). In this case, the ability of the Trust to borrow money will depend on the ability of the Trustees to be seen as worthy guarantors.

Hence, the credit history, personal asset statement etc. all come into play for the individuals behind the loan – either as individual Trustees or as Director’s of the Trustee company.

More commonly these days, lenders are starting to become a little more suspicious of elaborate schemes involving multiple entities and / or ‘bare guarantors’ – those with little income or assets but with a lot of contingent liabilities in the form of guarantees.

Like many things in the lending market, there is the lender’s formal policy and then there are the advantages that come from having a relationship with a senior lender who can cut to the chase and make things happen.

I am not suggesting anything illegal is done, only that these banker understand structures more than the standars loan officer at a branch level.

As you can see, there is a little more to this question than a simple answer. Terry is right to say that it shouldn’t make much difference, but often getting the bank to approve the loan is a matter of taking away all the reasons for them to say no as much as it is getting them to say yes.

All the best,

– Steve