Hi all,
First time post’er!
I just finished a meeting with a banker regarding applying for loans via the corporate trustee on behalf the family trust. (Pg 172 of the first book)
I was told a few things in which I’d like to clarify with other investor who have followed Steve’s method.
- A directors guarantee to repay the debt IS viewed the same as having the debt in your own name.
- A sensitized rate is applied to your subsequent investment property which is deducted from your salary plus rental income in which the bank will assess how much further you can borrow.
- Creating a new company required it to be established for a minimum 1 yr and have an income that must be supplied to the bank for credit assessment. (As a new company does not have any income.
I’m sure others have followed Steve’s structuring advice but this information I’ve received somewhat goes against what is written in the book (especially point 1)
Any advice ?
Many thanks,
Wil
Hi Wil
Welcome aboard :-)
In answer to your questions.
1. Correct
2. Depends on the bank – not all will do this. That’s why it can be advantageous to use a finance expert with access to a number of lenders.
3. Not true. It can be established for one hour if its sole purpose is to act as corp trustee and it’s non trading.
At the end of the day, borrowing under a trust won’t improve your borrowing capacity – that’s assuming that’s what you’re intending to do.
Cheers
Jamie
Jamie Moore | Pass Go Home Loans Pty Ltd
http://www.passgo.com.au
Email Me | Phone MeMortgage Broker assisting clients Australia wide Email: [email protected]
Hi Jamie,
Thanks for your reply. Yes I thought one of the advantages of purchasing property through this structure was for the fact you may leverage your salary for loan applications multiple times. I guess this means that even purchasing through this structure will ultimately be limited to your salary income ( same as purchasing as an individual)
I wonder if this is a mistake in the book or if its simply outdated now.
Wil
Hi Im having the same issue at present. Despite having $300k equity and $30k positive cashflow on two properties, they are rejecting me for lending!! Seems crazy, but now Im wondering how the hell Steve managed to borrow so much money for his 270 properties when they wont let me borrow for a 3rd!.
THanks
PS Im based in NZ
Twistiswit why is it crazy? You still need to show you can service the loan and without other income you may not meet the requiremets.
As a lawyer and mortgage broker I must say I agree with Jamie. No 3 is not correct. I set up trusts and clients are able to get finance with a brand new structure without any history with no problems – if you could borrow in your own name then you could borrow using a trust structure.
I would be interested to know which bank this was.
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
Hi Jamie, Thanks for your reply. Yes I thought one of the advantages of purchasing property through this structure was for the fact you may leverage your salary for loan applications multiple times. I guess this means that even purchasing through this structure will ultimately be limited to your salary income ( same as purchasing as an individual) I wonder if this is a mistake in the book or if its simply outdated now. Wil
No worries – you’re welcome.
Personally, I’m seeing less and less trust applications these days. They do have their place – but they’re not for everyone.
I’m not sure what’s written in the book – but there have been quite a few other new posters with the same question over the years.
Cheers
Jamie
Jamie Moore | Pass Go Home Loans Pty Ltd
http://www.passgo.com.au
Email Me | Phone MeMortgage Broker assisting clients Australia wide Email: [email protected]
Hi,
I get this question a lot: about the use of a company / trust structure and acting as guarantor rather than borrowing in your own name.
Strangely, I get about a third of people happily report they can still do it with no problem, about a third of people say they’ve tried and it can’t be done, and about a third of people who want to know is it yes or no.
So here’s the best answer I can give: it depends.
“On what?”, I hear you say. Well, on your relationship with the lender. If you come in via retail channels or via a ‘off the shelf’ mortgage broker, then the answer seems to be ‘no’. If you apply via an established lending relationship (and in particular, business banking), or via a well networked mortgage broker, then the answer tends to be ‘yes’.
So, once again, this proves the importance of networking and in the case of finance, you need to start well before you need the money.
All the best,
– Steve
Steve McKnight | PropertyInvesting.com Pty Ltd | CEO
https://www.propertyinvesting.comSuccess comes from doing things differently
Is there any lenders out there who would accept Trusts? I have same issue … Need to borrow more.
virtually all lenders lend to trusts.
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
Is there any lenders out there who would accept Trusts? I have same issue … Need to borrow more.
Most do – but there can be some quirks and it’s not always straight forward.
Cheers
Jamie
Jamie Moore | Pass Go Home Loans Pty Ltd
http://www.passgo.com.au
Email Me | Phone MeMortgage Broker assisting clients Australia wide Email: [email protected]
In addition some lenders charge a loaded rate / application fee etc when lending to a Trust with a Corporate Trustee whilst others are used to such structures and offer the same rate / terms.
Just a matter of finding a lender who is investor orientated and understands Trust lending.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
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