Can anyone tell me if they have been successful in establishing a trust with a company trustee and then borrowing in the name of the trust with a company director as the guarantor? Currently every broker I talk to informs me that the trust can't borrow money, but rather the loan must be in my name with the trust owning the property. Has anyone been successful in having a loan in their trust name and just going guarantor as Steve McKnight mentions in his book/seminars? If I keep pursuing the method that every broker tells me to do, I will soon accumulate a high personal debt that will ultimately prevent me from buy more properties as I get maxed out.
Any help/advice/experiences would be appreciated.
A trust is not a separate legal person. The borrowing would be by the corporate trustee possibly ATF XYZ trust. The minutes of the trust should reflect that the debt is owed by the trust
Ok, so the loan must be taken out by the company ATF the trust? Makes sense. Has anyone had any experiences doing this? I haven't been able to find a broker who doesn't want it in my name.
You have to be kidding me.
I have done 2 deals this week alone for forum clients who were buying in the name of XYZ Pty Ltd ATF ABC Family Trust.
I accept that many Brokers may not understand the concept but it is fairly straight forward.
One forum client this week told me her Broker had said she couldn't get more than an 80% lend using a Corporate Trustee and when i found out which lender he put the deal to i can undrestand why but we got 90% and at 0.45% less so client was happy alround.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
Thanks for that Richard.
To confirm, I can set up a loan in the name of ABC Pty Ltd ATF DEF Proprty Investor Trust with my name only being down as guarantor? Now for the big one, does this or does it not affect my personal borrowing capacity?
Richard
Can you have the loan document as
XXX Family Trust only (as a stand alone – not using ATF)
instead of
<personal name> ATP XXX Family Trust
I was being told that it offers better protection than 'ATF'?
Hi GOM
Hate to say simple answer is no as the Bank will want a Guarnatee from the Director /s
Andrew assuming you are the sole Director and the Trust isnt a Hybrid Trust then i cant see a problem.
The loan would be in the Company name as Trustee and you as a Director providing a personal guarantee.
With regards to the question as to whether it increases your borrowing capacity the simple answer is NO.
You are providing a Guarantee for the debt and therefore this would need to be disclosed in other applications.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
Ok, I understand that it won't increase my borrowing capacity, but will it enable me to borrow to within my capacity in one trust, then open another loan for another trust and borrow to that maximum capacity for that new trust as well? Or will I be maxed out by the first company/trust loan?
Also, what trust structures are traditionally used in this type of lend as I use a hybrid trust. What do lender's not like about lending to company's linked to a hybrid trust?
The fact of whether you should hold multiple properties within the Trust is more a Asset Protection decision rather than a lending decision.
As a Trustee / Director you will need to declare any other loans in any other entities you provide guarantees for and that will not matter whether it is 1, 2 or 6 separate Trusts.
Your personal income plus the income of the Trust (normally rent) will be considered.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
andrew.os wrote:Can anyone tell me if they have been successful in establishing a trust with a company trustee and then borrowing in the name of the trust with a company director as the guarantor? Currently every broker I talk to informs me that the trust can't borrow money, but rather the loan must be in my name with the trust owning the property. Has anyone been successful in having a loan in their trust name and just going guarantor as Steve McKnight mentions in his book/seminars? If I keep pursuing the method that every broker tells me to do, I will soon accumulate a high personal debt that will ultimately prevent me from buy more properties as I get maxed out.Any help/advice/experiences would be appreciated.
The most common trust structure i normally deal with are:
Mortgage owner— ABC pty ltd as trustee for Chan family trust
Borrower— ABC pty ltd as trustee for Chan family trust
Guarantor
Michael ChanThere is a range of combination you can do, some are more complex and some lender will try to avoid them- so work out with your accountant which is best for you; in term of finance – YOU will find a lender that will consider, it just depends on the lender you ask.
Richard would have answered most of your questions; but let me give you a few tip and what to avoid
1. Commercial or residential? – Dont be fooled, some lenders consider this as a commercial deal! but it’s NOT…it should be 100% residental deal..and you should be getting the standard residential rates.
2. Tax – As your aware buying as the trust will give you asset protection and tax advantage. HOWEVER most lenders or some brokers dont know how to structure your trust loan and the most common outcome is the borrowers losing their tax advantage.
3. Trust type? – there are many different type of trust you can set up in Aus, the most common are – Unit, Family, Hybrid and SMSF . Out of this list the one some lenders try to avoid are Hybrid and trust with company trustee, due to the amount of paper work, time and legal issue involved for the same “profit” ….it’s just not worth it to some banks.One of the banks that i like to deal with in term of trust is Citibank and HSBC- they tend to get it right most of the time.
Andrew — flick Richard an email and he will look after you!
Regards
MichaelMick C | Shape Home Loans
http://www.shapehomeloans.com.au/
Email Me | Phone MeSame Banks. Better Rates. Served With a Passion.
Hey,
Q for you Michael. How do you deal with hsbc? I thought they had exited the broker market.
Marty McDonald | Mortgage Experts
http://mortgageexpertsonline.com.au/
Phone MeHI Marty,
Your correct, HSBC is no longer part of the general broker market …im guessing due to cost VS numbers of loan placed through the broker/ aggregator market. However i had a direct accreditation with HSBC when they were in the market ( not via aggregator), and due to the amount of loans i had placed through to them and another products (not just home loans); im under a “direct contract agreement”
This is currently still possible, because i have my own full credit license and i’m not a credit “representative”.
Regards,
MichaelMick C | Shape Home Loans
http://www.shapehomeloans.com.au/
Email Me | Phone MeSame Banks. Better Rates. Served With a Passion.
HI Guys,
Just wanted to say thank you so much for all of the 'shared' info here – it really has been beneficial!
We are looking at getting our second IP and were told that after the GFC we can no longer use the above structure …. we were looking at different ways of getting money (have quite a bit of equity – but serviceability issues due to having a baby and only back at work part time)
Perhaps we have been misinformed?
Regards
BronBron
You must have been misinformed. If trusts could no longer borrow the economy would end,
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
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