Join Australia's most dynamic and respected property investment community

Trust on title but borrowers will be individuals

Discussion in 'Property Finance' started by Syd Investor, 28th Jun, 2016.

  1. Syd Investor

    Syd Investor Member

    Joined:
    19th Jun, 2015
    Posts:
    20
    Location:
    Sydney
    This is one for the brokers. Do you know which lenders will accept scenario 2 below? Most I am aware of only accept scenario 1:

    • For example, if John Smith is the director of ABC Pty Ltd, the trustee for The Smith Unit Trust, then the loan could be set up in two ways:

      • Borrower: ABC Pty Ltd As Trustee For The Smith Unit Trust
        Mortgagor / property owner: ABC Pty Ltd As Trustee For The Smith Unit Trust
        Guarantor: John Smith

      • Borrower: John Smith
        Mortgagor / property owner: ABC Pty Ltd As Trustee For The Smith Unit Trust
        Guarantor: ABC Pty Ltd As Trustee For The Smith Unit Trust

    Thanks for your help. Also what tax implications will this have if any as the borrower is still the trust on both scenario's (Terry or anyone else)...Thanks guys
     
  2. Gen-Y

    Gen-Y Well-Known Member

    Joined:
    8th Nov, 2015
    Posts:
    53
    Location:
    Brisbane - Sydney
    Borrower: John Smith
    Mortgagor / property owner: ABC Pty Ltd As Trustee For The Smith Unit Trust
    Guarantor: ABC Pty Ltd As Trustee For The Smith Unit Trust

    Only a selective few banks will lend.

    That's how I have structured it as well.
     
  3. Peter_Tersteeg

    Peter_Tersteeg Finance broker and strategist Business Member

    Joined:
    18th Jun, 2015
    Posts:
    2,100
    Location:
    Melbourne, Nationwide
    Are the lenders aware that it's a unit trust?
     
  4. Jess Peletier

    Jess Peletier Mortgage Broker - Australia Wide Business Member

    Joined:
    18th Jun, 2015
    Posts:
    2,773
    Location:
    Perth WA
    The borrower in the second scenario is not the trust, it's the individual.
     
  5. Corey Batt

    Corey Batt Finance Strategist Business Plus Member

    Joined:
    14th Jun, 2015
    Posts:
    1,167
    Location:
    Adelaide, SA
    We use Advantedge a lot for these deals - you'll find some lenders can't get their heads around the swap in borrower/guarantor and many won't touch unit trusts.
     
  6. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

    Joined:
    18th Jun, 2015
    Posts:
    8,979
    Location:
    Sydney
    The trust cannot be on title as it is not a legal person. The property is owned by the company but the loan is in an individual name = 3rd party lending.

    The trust has largely nothing to do with it. The problem is that the borrower is not the owner of the property so limited lenders.

    I do these sorts of deals with St G - got one going through right now.
     
  7. Jess Peletier

    Jess Peletier Mortgage Broker - Australia Wide Business Member

    Joined:
    18th Jun, 2015
    Posts:
    2,773
    Location:
    Perth WA
    CBA will also do it. Macq used to as well - haven't tried with them recently though.
     
  8. Syd Investor

    Syd Investor Member

    Joined:
    19th Jun, 2015
    Posts:
    20
    Location:
    Sydney
    Thanks guys for all your input. I really appreciate. it. The scenario is for a friend so thought I would ask the experts on here as he was getting conflicting information from his bank.
     
  9. Rolf Latham

    Rolf Latham Inciteful (sic) Staff Member Business Plus Member

    Joined:
    14th Jun, 2015
    Posts:
    1,165
    Location:
    Gold Coast
    Limited lenders due to the deemed third party security guarantee needed from the trustee .

    Ta

    Rolf
     
  10. Marty McDonald

    Marty McDonald Mortgage broker

    Joined:
    22nd Jun, 2015
    Posts:
    228
    Location:
    Sydney North Shore and Norther beaches
    St G & CBA but be careful they don't change the structure on you to Pty Ltd as borrower and mortgagor without advising you.

    Had this happen last year with St G and and as I wasn't privy to the loan offer documents I didn't know until the loan had settled in the incorrect structure. I also couldn't understand why the solicitor was reluctant to give the guarantee advice sign off when they were meant to be borrowing in own names. Poor fella must have thought I was daft as I keep harping on about the fact that they were guaranteeing themselves (ie already borrowers) so what's the problem!!

    Lesson: review documents for clients on all occasions.
     
    Perthguy likes this.
  11. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

    Joined:
    18th Jun, 2015
    Posts:
    8,979
    Location:
    Sydney
    I had this happen with St George recently. Documents were issued with the company as borrower and not the individuals.

    If it settled it would have been a disaster as the interest would not have been deductible to the individuals.
     
    Perthguy likes this.
  12. Corey Batt

    Corey Batt Finance Strategist Business Plus Member

    Joined:
    14th Jun, 2015
    Posts:
    1,167
    Location:
    Adelaide, SA
    Ditto - that's where especially with these types of structures I prefer it be with a lender who will send copies that I can review, it happens too often to trust the assessor/doc team to follow instructions.
     
    Terry_w likes this.