Rental income not classified as income for loan?

Discussion in 'Loans & Mortgage Brokers' started by Mermaid, 17th Feb, 2020.

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  1. Mermaid

    Mermaid Active Member

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    I've got the transfer for an investment property thats being held in trust, but it's being stalled because of a dispute with revenue over stamp duty. I am receiving the rent for this property and thought that it could be used as serviceability for a loan. A broker has informed me it's not classed as income because the property Is not actually in my name, making my income too low to get the loan I need. Is this correct?
     
  2. Jess Peletier

    Jess Peletier Mortgages, Finance & Property Strategy Aust Wide Business Member

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    Is the trust yours? Are you director?

    I'm assuming the refi will be settled once the transfer is complete, in which case it'll be in your name and no problems.

    You can certainly use rent in this scenario.
     
  3. Mermaid

    Mermaid Active Member

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    I'm beneficiary- the transfer has been sitting on my solicitors desk for 6 months, he's filed a couple objections re stamp duty but hasnt done anything further. This is an urgent loan (to pay someone else) and the transfer could take a few more months if going to a tribunal etc.
     
  4. Rolf Latham

    Rolf Latham Inciteful (sic) Staff Member Business Plus Member

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    are you the sole director of the trustee though ?

    ta
    rolf
     
  5. Mermaid

    Mermaid Active Member

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    I've never heard this term, sorry. I am quite sure not- it's currently held by a private trust company.
     
  6. Terry_w

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

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    Sounds like a bare trust. Can you prove the trust relationship? The lender should take the rent as income if it is income - you would be declaring the income in your tax return.
     
  7. Peter_Tersteeg

    Peter_Tersteeg Well-Known Member

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    Are you a director of the trustee company? Are you an appointor of the trust (you can find this in the trust document).

    If you're either of these things, then it should be fairly easy argue the rental income is effectively yours. If not, then you'd likely have to demonstrate that you've received income distributions from the trust over the last few years to make your case.
     
  8. Paul@PFI

    [email protected] Tax Accounting + SMSF Business Plus Member

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    If the borrower is not in control of the trust (ie not a trustee Director) and the trust is a disc trust the lender may have sound reasons.
     
  9. Terry_w

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

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    Everyone has missed it, but this seems to be a bare trust, where X owns the property for Y absolutely. There will be no appointors, no discretion, and perhaps no deed. The beneficiary would have the right to all income and capital and can demand transfer of title at any time. This situation may have arisen by will or by circumstances.If the trustee is a professional trustee it probably arose as gift under a will. The will is essentially the trust deed and could be shown to the lender together with the tax returns to prove rent - if the period is long enough (perhaps none lodged yet)
     
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  10. Paul@PFI

    [email protected] Tax Accounting + SMSF Business Plus Member

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    One of those complex issues most lenders would be confused by.
     
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  11. Mermaid

    Mermaid Active Member

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    Yes it seems that uou
    Yes I am finding this. It seems the brokers I've spoken with say the big banks won't accept.
     
  12. sumterrence

    sumterrence Well-Known Member

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    There is too little details to determine if the broker was right or wrong. How long have you been receiving this rent? And tax return to prove it?
     
  13. RobMat

    RobMat New Member

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    As I know it is enougth to have prove for example from bank bout your incomes? And do you want to take a loan from bank? It also depends how much.