Finance for purchasing within a Trust.

I'm looking to purchase a block of land from a Developer that is offering an 18 month Leaseback. At the end of the Leaseback period I will be looking to build a dual occupancy dwelling on the block. This will be a never sell as it will be handed down. I know things change over time, but it will be a "keep it in the family" type scenario.

As I wish to purchase this within a Trust, is there anything special I need to know? Is there much of a difference to Financing the purchase in your own name? LVR levels etc?

 

There's a few lenders that have restrictions on various types of trusts. The usual caveats to get legal and tax advice apply, but usually people would use a discresionary (family) trust, generally with a corporate trustee. These are commonly accepted by most lenders.

Allow for a bit of extra time and costs in the financing process for the trust to be vetted by the bank. You'll probably have to get legal advice on the paperwork (more time/cost).

 

There are a wide variety of discretionary trusts with varying degrees of asset protection. You need to consider the type of discretionary trust and the terms of the deed. The trustee needs the power to borrow and to mortgage trust assets.

You also need to consider the structure of the trustee. How the trustee is set up will largely determine who will need to give personal guarantees. You want to make sure you minimise guarantees as an asset protection strategy and to reduce the hit on serviceability.

And watch out for named beneficiaries on the deed as some lenders will want personal guarantees from all named adult beneficiaries - which is not desirable.

 

I absolutely agree with everything that Terry has stated above!

I have some properties financed through ANZ that are in a discretionary trust. They wanted guarantees from the listed trust beneficiaries (annoying, as by the very nature of a discretionary trust, beneficiaries may not never receive any benefit).

Also, CBA seemed to panick at the very mention of a trust! I don't know if it is lender policy, or if I just dealt with the wrong person? Either way, a good broker should help find an accommodating lender.

 

Hi Wall Street - interesting with ANZ, can't say I have come across a situation like that before. When I set up trusts I try to keep the named beneficiaries to 1 person where I can.

see this too
Legal Tip 91: Structuring a Trust to Maximise Borrowing Capacity https://propertychat.com.au/communi...-a-trust-to-maximise-borrowing-capacity.5010/

 

Most of the trust deeds I see are between a couple or single, the named beneficiary usually reflect the guarantors so it's rarely a big deal. The last time I checked the NAB isn't very fussy about this issue though.

The biggest problem with the ANZ and trusts is it's still a fully manual application. It's an exercise in paper pushing and the process significantly more difficult than their regular home loan application process. We've had cases where we had to submit an application 2-3 times before they even acknowledged receiving it. I believe Westpac has their own quirks for similar reasons.

The CBA and NAB however aren't bothered by this sort of thing at all. It's still a more extended process due to the involvement of the trust, but they can cope with it.

 

have found St G to be the best with trusts. Smoothly goes through if you are prepared to wait for the long turn around times.

ANZ requires a lawyer sign off which is very comprehensive. I have refused to sign this for my law clients in some instances if they are unable to provide the extensive documentary proof needed.

 

NAB are a pain in the arse. They always seem to want the deed amended no matters how old or new.