Borrowing using a trusts
- Thread starter scott
- Start date
Hi Scott
Using a hybrid trust will produce a completely different result than using a family trust.
Under a hybrid trust, the individual borrows money to buy the units in the hybrid trust. The hybrid trust is then cashed up and so it uses those funds to buy the IP.
In my experience, and Rolf might be able to say differently, there is no premium or penalty for using a trust.
Dale
The bank presumably does not just give you $300K or whatever to buy units in the trust, so it wants to hold the property as security, but how does it actually go about doing that when the trust will own the property (actually perhaps a corporate trustee on behalf of the trust).
How does this actually work to the banks satisfaction?
How does this actually work to the banks satisfaction?
Hiya
The purchasing of special units in no way involves the lender.
Its my understanding that the borrower is the natural person that the tax benefit is to flow to.
These are still relatively new concepts to many lenders, and generally you wont get a huge slug on rates BUT be prepared for some stiffer fees if you are using a P/L trustee and a looooooong battle with those assesors that havent dealt with them.
I suspect that where you could have got 95 % Lvrs personally some of the LMI providers will cut you to 90 or less. In fact, some LMI providers are so daft they may refuse cover all together in some structures.
Talk in detail with your Broker/personal lender/banker and get clear direction before application.
ta
rolf
The purchasing of special units in no way involves the lender.
Its my understanding that the borrower is the natural person that the tax benefit is to flow to.
These are still relatively new concepts to many lenders, and generally you wont get a huge slug on rates BUT be prepared for some stiffer fees if you are using a P/L trustee and a looooooong battle with those assesors that havent dealt with them.
I suspect that where you could have got 95 % Lvrs personally some of the LMI providers will cut you to 90 or less. In fact, some LMI providers are so daft they may refuse cover all together in some structures.
Talk in detail with your Broker/personal lender/banker and get clear direction before application.
ta
rolf
Hi all,
I'm also interested in Kevmeister's question and I apologise but I still do not understand. If a bank lends you money to purchase and IP in the name of a family trust, and you (for whatever reason) default on this loan, how then does the bank go about getting it's money back if it does not have access to the property itself? (ie, it can't sell it to recoup it's losses)
Cheers
John
I'm also interested in Kevmeister's question and I apologise but I still do not understand. If a bank lends you money to purchase and IP in the name of a family trust, and you (for whatever reason) default on this loan, how then does the bank go about getting it's money back if it does not have access to the property itself? (ie, it can't sell it to recoup it's losses)
Cheers
John
Hiya JD
They certainly do have access.
The trustee gives a mortgage and the trustee gives a guarantee and if the trustee is a coro trustee the directots also give a personal guarantee.
ta
rolf
They certainly do have access.
The trustee gives a mortgage and the trustee gives a guarantee and if the trustee is a coro trustee the directots also give a personal guarantee.
ta
rolf
And what does the guarantee take the form of?
He he. Yeah baby 
I provided a personal guarantee on my PPOR for a property bought in the name of the trust. That means the bank has the right to sell my PPOR if the trust defaults on payments.
There was also a caveat in there somewhere, but I'm not quite sure how that fits in. Something like the trust not being able to sell the property without my personal consent.
Hi all,
I really need some help here.
I am trying to borrow in the name of the Hybrid trust ATF my family trust and Westpac have come back to me saying it will be a commercial/business loan at 7.4% (not the 5.97% I am getting being on the professional package for the rest of my loans with them).....my broker then tried the CBA who would do their pro pack but had problems with my serviceability as they look at serviceability on 7.58% even though the loans would be at 6.07....so now we are trying NAB (do they have a pro pack? and what rate is it?)...
Otherwise , who else will accept the Hybrid trust at discounted rates?
Help!!!!
I really need some help here.
I am trying to borrow in the name of the Hybrid trust ATF my family trust and Westpac have come back to me saying it will be a commercial/business loan at 7.4% (not the 5.97% I am getting being on the professional package for the rest of my loans with them).....my broker then tried the CBA who would do their pro pack but had problems with my serviceability as they look at serviceability on 7.58% even though the loans would be at 6.07....so now we are trying NAB (do they have a pro pack? and what rate is it?)...
Otherwise , who else will accept the Hybrid trust at discounted rates?
Help!!!!
Hiya
Of course Westpac will do hybrids on a residential basis, as will half a dozen others, least we have had them through westpac recently.
St George, NAB, Homeside, Bankwest, Heritage, ING, Adelaide all spring to mind.
Protect you CRAA ! Too many dead apps wont help you in the future. Get written commitment on the strcuture before you submit.
Ta
rolf
Of course Westpac will do hybrids on a residential basis, as will half a dozen others, least we have had them through westpac recently.
St George, NAB, Homeside, Bankwest, Heritage, ING, Adelaide all spring to mind.
Protect you CRAA ! Too many dead apps wont help you in the future. Get written commitment on the strcuture before you submit.
Ta
rolf
Borrowing with Hyrid Trusts - Part 2
I am in the process of purchasing a property where I signed the contract for the property under "ZZZ company ATF ZZZ trust".
I however applied for the loan under my own name, through the ANZ bank and managed to get their standard interest rates, HOWEVER the process of getting the loan approved was a very long process.
Anyway, my question follows on from Rolf's comments about "The purchasing of special units in no way involves the lender". What you are saying Rolf is that the bank settles on the property as normal. You then get an accountant to say that you purchased the units in the trust and IMMEDIATELY then went to purchase the property, correct?
Will the ATO accept this as a purchase of the units? Main point is, will I still be able to negative gear the property successfully?
I am in the process of purchasing a property where I signed the contract for the property under "ZZZ company ATF ZZZ trust".
I however applied for the loan under my own name, through the ANZ bank and managed to get their standard interest rates, HOWEVER the process of getting the loan approved was a very long process.
Anyway, my question follows on from Rolf's comments about "The purchasing of special units in no way involves the lender". What you are saying Rolf is that the bank settles on the property as normal. You then get an accountant to say that you purchased the units in the trust and IMMEDIATELY then went to purchase the property, correct?
Will the ATO accept this as a purchase of the units? Main point is, will I still be able to negative gear the property successfully?
Sunnywan
The lender will generally want to look at the trust deed. The trustee then provides a mortgage on the property as security for the loan.
You should ensure your paperwork is complete. Units need to be issued for the loan amount on the same date.
Unfortunately, the ATO dont believe many accountants they will want to see documentation. You should be able to still neg gear.
I have seen deals such as these thru ANZ, Westpac, NAB, AMP, and BankWest
Cheers
nick
The lender will generally want to look at the trust deed. The trustee then provides a mortgage on the property as security for the loan.
You should ensure your paperwork is complete. Units need to be issued for the loan amount on the same date.
Unfortunately, the ATO dont believe many accountants they will want to see documentation. You should be able to still neg gear.
I have seen deals such as these thru ANZ, Westpac, NAB, AMP, and BankWest
Cheers
nick
NickM,
Thanks for your reply. I believe my documentation is complete:
1. Loan is in my name
2. Property contract is in "company ATF trust"
3. I have given deed docs to bank who have in turn approved the loan, with "company" as security for the loan
4. I have organised for my accountant to setup documentation for purchase of units for the loan amount
5. Property will settle this Friday lunchtime
Is there anything I have forgotten. I am abit paranoid about this as this is the first time I'm purchasing under a trust - and don't want to miss a step. The next time will be alot easier.
Thanks!
- Sunny.
Thanks for your reply. I believe my documentation is complete:
1. Loan is in my name
2. Property contract is in "company ATF trust"
3. I have given deed docs to bank who have in turn approved the loan, with "company" as security for the loan
4. I have organised for my accountant to setup documentation for purchase of units for the loan amount
5. Property will settle this Friday lunchtime
Is there anything I have forgotten. I am abit paranoid about this as this is the first time I'm purchasing under a trust - and don't want to miss a step. The next time will be alot easier.
Thanks!
- Sunny.
Sunny
looks Ok to me.
Just ensure your accountant issues "special Income units" and you also sign the appropriate resolutions / minutes
you should also have a separate trust bank acct to receive rentals etc.
Good luck and dont forget that this time next year you will need to register for land tax
Nick
looks Ok to me.
Just ensure your accountant issues "special Income units" and you also sign the appropriate resolutions / minutes
you should also have a separate trust bank acct to receive rentals etc.
Good luck and dont forget that this time next year you will need to register for land tax
Nick
