Trust Loans

OzBroker’s Guide to Trust Loans

Trust Types Eligible for Loans

A variety of trust structures can obtain loans, commonly for property investment. These include:

  1. Discretionary Trusts
  2. Family Trusts
  3. Unit Trusts
  4. Hybrid Trusts or Property Investment Trusts (PITs)
  5. Self-Managed Superannuation Fund Trusts (SMSF)
  6. Service Trusts

All these trust types are eligible for home loans, but only select lenders accommodate them. Generally, obtaining trust loans can be tougher for hybrid trusts and trusts with corporate trustees.

Interest Rates

Competitive rates can be discussed; reach out to OzBroker for more information.

Available Lenders

Both bank and non-bank lenders are accessible; connect with OzBroker for more details.

Eligibility Inquiry

Our mortgage brokers are knowledgeable about lenders with flexible genuine saving policies. Contact OzBroker!

Trusts are often utilised to acquire investment properties due to the asset protection and tax advantages they provide. However, structuring trust loans properly can be challenging for many lenders, leading to borrowers missing out on these benefits.

Lender’s Assessment Criteria

Lenders perform a comprehensive credit assessment of trust applications to determine approval of trust mortgage and focus on several aspects:

  • Trust Type: Banks have varying preferences; some favour discretionary or family trusts, while others prefer hybrid and SMSF trusts.
  • Trust Credit File: Lenders review the credit files of directors, beneficiaries, trustee companies, and, occasionally, trusts themselves.
  • Trust Deed: Lenders verify the trust deed to confirm the beneficiaries and ensure the trustee has the authority to apply for loans on behalf of the trust.
  • Loan Structure: Some opt to have the loan under the trustee or the director’s name, with the trust as the mortgagor, to leverage negative gearing benefits.
  • Beneficiaries: Some lenders might require all adult beneficiaries to act as guarantors.

OzBroker understands the nuances of what banks look for when assessing trust loans.

Required Documents

Banks would need several documents to process trust loans, including certified copies of the trust deed and company constitution, identification for all involved parties, and sometimes, tax returns for the trust. Contact OzBroker or fill in our free assessment form for a specific list of required documents.

Possibility of Discounted Loans for Trusts

Yes, it’s possible! The key is finding a lender that aligns with your trust type and proposed loan amount, ensuring the loan is processed as a residential loan to avoid extra fees. Sadly, many lenders struggle with trust loans, leading to higher costs and complications for borrowers. Contact OzBroker to find out suitable lenders for your trust.

Lenders’ Perspective on Trusts

Trust mortgages are often perceived as intricate and labour-intensive, with no additional profit for lenders. Many banks and brokers lack the knowledge on trusts, causing delays and mistakes in applications, and often higher rates and fees for customers.

OzBroker specialises in financing loans for trusts and can help navigate through these complexities.

Why Don’t All Banks Lend to Trusts?

Many banks are concerned about the legal enforceability of loans to certain trusts and potential taxation rule changes, making trust loans less appealing due to the additional workload and lower profitability. Reach out to OzBroker for lenders who are willing to offer competitive rates and lower fees.

Banks’ Solution to Trust Loan Issues

To manage inquiries about trust loans, major banks usually direct customers to their business banking department, which often results in higher rates and fees. OzBroker can assist in finding lenders with more favourable terms.

Additional Fees for Trust Loans

Lending to a trust does incur additional fees due to the extra work needed in preparing documents. Typically, these legal fees range between $200 and $500.

Loan Set-Up Possibilities

Loans can be set up in the name of the trustee or director of the trustee rather than in the trust’s name. Contact OzBroker or your accountant for advice on different structures and to find lenders that can accommodate your preferred loan structure.

Selling Property to Trust

Selling your investment property to your own trust is possible but may incur stamp duty and capital gains tax.

Low Doc Loans for Trusts

Low doc trust loans are available, allowing income declaration without providing tax returns as proof. Contact OzBroker for lenders who can consider low doc loans for trusts.

Understanding Trusts

Trusts are entities allowing assets to be owned on behalf of others, governed by a trustee according to a trust deed. They offer benefits such as tax savings, asset protection, and estate planning.

Benefits of Trust Property Purchase

  • Tax Advantages: Potential reduction in tax through income distribution.
  • Asset Protection: Control and receive income without owning assets in your name.
  • Estate Planning: Pass assets to future generations efficiently.

For more tips on investing using a trust, visit our trust information page.

For any inquiries or further assistance, please call us or complete our free assessment form today!

Disadvantages of Purchasing Property under a Trust

Missing Out on Negative Gearing Benefits

When you buy property in a trust, you don’t get immediate tax benefits. However, you might be able to balance out any losses you experience from owning and managing the property against future profits.

A usual approach is to purchase your initial investment properties in your personal name to gather good equity and receive negative gearing benefits from the Australian Taxation Office (ATO). Afterward, you can transfer ownership to a trust structure.
Please consult your accountant before finalising any investment strategies.

Higher Accounting Fees

The set-up costs and yearly accounting fees tend to be higher for properties owned in a trust due to the more complicated tax returns.

Importance of Proper Mortgage Structure

This isn’t necessarily a disadvantage, but it’s crucial to be conscious of.

Seeking help from a mortgage broker like OzBroker, experienced in trust loans, is important to secure financing that suits your needs and helps in diversifying your risk to avoid exceeding mortgage exposure limits.

Do Beneficiaries Have to Guarantee a Trust Loan?

Usually, in trust loans, the trust company is the borrower, and the directors are the guarantors. But some lenders insist all adult beneficiaries to be guarantors.

If that’s the case, you will need to:

Provide proof of your financial status, including assets and liabilities. Obtain legal advice and sign agreements with the borrower.

Present full identification, typically required if you own 25% or more of the trust.

How to Identify a Beneficiary?

A trust deed generally lists beneficiaries, but in a discretionary trust, any friend or family member of the sole beneficiary is also considered a beneficiary. For unit trusts, the beneficiaries are clearly listed in the trust deed schedule.

Obtaining a Loan in a Trust

Yes, you can borrow with a trust! At OzBroker, we aid you in ensuring all components of your trust loan are optimal for the highest returns on your investments. We are well versed in the workings of a trust and know which lenders are trust-friendly.

Please complete our free assessment form or contact us at 0426667696 to talk to a mortgage broker who is an expert in assisting people in securing loans for their trusts.

Scroll to Top