Improving servicability by buying property in company name.

Discussion in 'Loans & Mortgage Brokers' started by Harry30, 28th Feb, 2018.

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  1. Harry30

    Harry30 Well-Known Member

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    I recently purchased cashflow positive property in a company name, largely to minimise land tax. I am a director of company and 50% shareholder (wife owns other 50%) Debt is in the company name. I gave a personal guarantee for the debt as you do. If I apply for a new loan in my name, I must declare the debt as an obligation for the purpose of assessing servicability (Right?). This lowers amount I can borrow (Right?). However, is there a chance I could negotiate with the bank to remove personal guarantee (by improving their security through greatly lowering LVR), and in do doing so, removing obligation to declare debt (debt is in company name), hence improving my servicability. Or is removing a personal guarantee not something banks do. Interested in views.
     
  2. Trainee

    Trainee Well-Known Member

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    how will you be doing this?
     
  3. Harry30

    Harry30 Well-Known Member

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    By paying off some of the loan and/or getting the property revalued.
     
  4. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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    Some lenders don't take guarantees into account when working out serviceability.
    Banks won't remove a personal guarantee.

    Why not have the trustee of a discretionary trust as shareholder? No tax flexibility with individuals owning shares
     
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  5. BeefEater

    BeefEater Active Member

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    Does this apply to any of the mainstream lenders?
     
  6. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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    Yes
     
  7. Harry30

    Harry30 Well-Known Member

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    Thanks. Could sell shares in company to discretionary trust. So, I get flexibility on distribution and presumably some asset protection.
     
  8. Harry30

    Harry30 Well-Known Member

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    And if I choose right lender, growing the company does not impact personal servicability.
     
  9. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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    this is possible, but have to consider many things such as the clawback provisions, cgt, stamp duty, valuation etc.
     
  10. Rolf Latham

    Rolf Latham Inciteful (sic) Staff Member Business Plus Member

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    AMP WBC Sun and a smattering of others by exception.

    If the loan is regulated by NCCP a real life assessment of "suitability " still needs to be made.

    ta
    rolf
     
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  11. SharonC

    SharonC Active Member

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    How about some of the non conforming lenders like pepper, liberty,redzed?
    for those with mature porfolios with some properties under a trust
     
  12. Corey Batt

    Corey Batt Well-Known Member

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    Nowhere near as generous - in the end there isn't a perfect lender which doles out borrowing capacity for every scenario. I'd say if you're running low with the higher servicing lenders such as Liberty - you're scraping the barrel as is and should be considering how to continue with your wealth strategy outside of just buying more property with debt.
     
  13. Marty McDonald

    Marty McDonald Mortgage broker Business Member

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    With this though if you are a director of the company they will want financials for that entity going forward (or letter to state no liabilities and profitable). This will reveal the debt. If positively geared inside the company it might be ignored but if the company is running on a loss I would doubt.
     
  14. Harry30

    Harry30 Well-Known Member

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    I go out of my way to ensure the company is marginally profitable (it is non trading company and holds a single property) as I can just imagine the problems a bank would have assessing servicability if they found the company was run at a small loss. And it would not be a parking fine, it would be more the death penalty.
     
  15. Rolf Latham

    Rolf Latham Inciteful (sic) Staff Member Business Plus Member

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    dunno bout RZ, but liberty pepper take all liabs into account

    ta
    rolf
     
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  16. SharonC

    SharonC Active Member

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    hi rolf
    would cba and macquarie bank take all liabilities into account or could they ignore guarantees in servicing
    thanks in advance
     
  17. Rolf Latham

    Rolf Latham Inciteful (sic) Staff Member Business Plus Member

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    Not sure bout Macq

    but pretty sure CBA take it all

    ta
    rolf
     
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