Loan Tip: Changing Trustees and Loans/Mortgages

Where a property is held by a trustee of a trust and there is a mortgage over the property to secure a loan any change in the legal ownership will mean the mortgage must be discharged and reregistered. Where the mortgage relates to a loan this will usually mean a new loan application will be needed as the borrower will be changing as well as the mortgagor.

This will mean requalifying for the loan again.


Example

Homer as Trustee of the Simpson Family Trust buys a property. The loan is in his name and he has mortgaged the property.

Homer wants to resign as trustee and have the appointor appoint a company as trustee. This is done and the title will need to change from Homer’s name to that of the Company.

To change the title the lender, who is the mortgagee, must agree to release the mortgage and to lodge a new mortgage. To do that they will need to reassess the loan to make sure serviceability is met.

This would be the case if Homer would be the sole personal guarantor too.