Loan Setup

Discussion in 'Loans & Mortgage Brokers' started by stevec, 7th May, 2018.

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  1. stevec

    stevec Member

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    Hi All,

    Would like to run a situation by you all for opinions.
    This is for a commercial property.
    Organised finance through a broker, the bank has come back and said all good to go.
    How I thought it should of been structured is - property to be in my wife’s name only, loan was to be in my wife’s name with myself as guarantor for the loan (I am the sole director of the business she is a 50% shareholder only)
    Bank has now advised that the loan has been setup as follows - property title in her name, loan to be in business name and my wife to act as guarantor.
    This sounds absolutely crazy to me???
    As settlement is next week, we seem to have no other option but to proceed with this setup and then change this after settlement to how I thought it should be, but obviously there will be refianance costs!
    For the brokers out there, how weird does this deal sound?
    For us it seems very strange?

    Thanks
    Steve
     
  2. Terry_w

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

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    Do you mean Company has been put as borrower?
    You should not do this.
     
  3. Phantom

    Phantom Well-Known Member

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    Hard to comment with such little info. You mention a business. What business? What does it have to do with this purchase? How did a business mistakenly become an applicant to a commercial property loan which settles next week yet no one knew about it? Who signed the application? Who signed the mortgage? WHAT is the mortgage? Is someone's owner occupied property tied up in this too and you don't know about that either?
    Proceed to settlement and then change? A commercial purchase? This is going to cost you significant funds in application, valuation & brokerage fees. Not to mention potential transfer costs. Speak to your broker now and get clarity. Although difficult, there may be a chance to correct things before it's too late.
     
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  4. stevec

    stevec Member

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    Correct company as borrower
    My wife as owner of the property
    Just never heard of this setup before?
     
  5. Rolf Latham

    Rolf Latham Inciteful (sic) Staff Member Business Plus Member

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    Sounds like ANZ or NAB business banking.....

    ta
    rolf
     
  6. Terry_w

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

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    Will the property be used for the business?
     
  7. stevec

    stevec Member

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    you are too good Rolf.......
     
  8. stevec

    stevec Member

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    My business (or should I say my wifes business, I am the sole director, she and I are 50% shareholders)
    Nothing to do with this purchase - until the bank has advised me otherwise!
    Broker accidentally did put the business as the applicant, but when the COS was sent to the bank they realised it has my wifes name on it. They then questioned the broker, who advised them that the application was a mistake and confirmed the purchase was indeed in my wifes name.
    They advised they had to change the application, hence the broker thought, or assumed they were getting it right.
    Yes its just a nightmare....
     
  9. stevec

    stevec Member

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    no nothing to do with the business.
    It was just supposed to be an investment property in my wifes name that would be rented out to a third party not related to us or the business.
    That's why I cant get my head around how this deal could get approved?
    The business will now have a debt against it, but no asset?
     
  10. stevec

    stevec Member

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    cant (or shouldn't??) name names but you are spot on as always :)
     
  11. Terry_w

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

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    Perhaps this is a way to circumvent the NCCP.

    But it could result in a breach of the corporations law and result in all sort of tax issues.

    BTW, You are confusing a business with a company. 2 different things.
     
  12. stevec

    stevec Member

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    Sorry should I be saying a Pty ltd company?
    NCCP mind my ingnorance, this stands for?
    We are thinking it’s best to pay for this property (outright) using funds we have in our offset and then go back to the bank, or another bank and apply for the loan the right way?
     
  13. Rolf Latham

    Rolf Latham Inciteful (sic) Staff Member Business Plus Member

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    ding
     
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  14. Terry_w

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

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    National Consumer Credit Protection Act. Banks have to lend responsibly - but not to companies!

    If you pay cash and then finance it the interest won't be deductible.

    Seek specific credit and legal advice. Did you do this through a broker?
     
  15. Trainee

    Trainee Well-Known Member

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    Though the entity on the loan has to be on the title.
     
  16. Rolf Latham

    Rolf Latham Inciteful (sic) Staff Member Business Plus Member

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    um

    nah

    ta
    rolf
     
  17. Terry_w

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

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    The individual gives the mortgage, the company borrows money.

    Division 7A issues need to be considered, as well as FBT and deductibility of interest. Can the owner claim the interest if they have not borrowed the money? No.
     
  18. stevec

    stevec Member

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    The bank has sent documents for legal and credit advice yesterday. We are supposed to see our accountant and solicitor to get these forms signed off.
    The broker never got to see them, until I sent them to him as the bank sent them directly to me.
    It is all just very very fishy, looks like the only way around all of this is to try and delay settlement and get the loan docs changed to the right way
     
  19. Greyghost

    Greyghost Well-Known Member

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    The broker should be taking the lead on this and addressing the issues. Even if settlement is delayed it is in your best interests to have this rectified...
     
  20. Rolf Latham

    Rolf Latham Inciteful (sic) Staff Member Business Plus Member

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    Its possibly a bit more complicated than that .......... It may need to be done that way due to a variety of reasons, some of which may be short term self employment, marginal serviceability etc.

    I would hope the broker/banker can shed light

    ta

    rolf
     
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  21. stevec

    stevec Member

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    Maybe...but company has been going strong for nearly 10 years now. Yes my wife has less serviceability as she owns another investment, but even the bank/broker said that the company has heaps of serviceability, no reason why I/the company could not be the guarantors for the loan. I think it has been a miscommunication between the bank & broker. Originally the paperwork was filled in with the company who was the purchaser etc. but when the COS was received by the bank, they noticed it was in the wifes name. They questioned the broker, who said yes it was a mistake, my wife is the purchaser.
    The broker assumed that the bank would then change the loan to my wifes name as well, but they haven't.
    That's the sticking point, as the broker didn't chase them up and they have now provided the doc's with the company having the loan.
    As its the eleventh hour (settlement next Wednesday) the bank has said that it will take another 10 days minimum to change the docs around, which doesn't leave enough time.
    Both the bank/broker are saying we can change it after settlement, but obviously the bank isn't going to waive the refi costs - or that's what I assume, as they believe they have done everything right
     

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