Unlimited borrowing using Family Discretionary Trust

Firstmac doesn’t either. What are the banks that your clients go to most for trust lending?

 

My company probably uses NAB, AMP, Macq the most for trust lending.

 

Hi Terry_w,

Can you explain above answer in bit more detail? Also, if a property development company has good income for 2 years in a row, can company borrow in its own right? i.e. directors' personal guarantee will be there but can company borrow beyond directors' DSR limits? i.e if director's DSR limit is lets say at 8.5 DSR upper limit, its 2.5 million. This capacity is exhasuted. Now if company has net 350K or so income each of last 2 years, can company borrow additional amount ? Also, does this work for new builds or only for existing residential properties ?

 

A company is a separate legal entity to the directors and shareholders. When a company borrows it is the borrower, the director is not the borrower. A lender will require a guarantee from the director but it is not a debt of the director (unless the borrower defaults perhaps).

When a company borrows its income and the income of the guarantors will be taken into account for servicing (and their debts).

 

Thanks Terry.
Does company borrowing is capped at 8.5 DSR too?

 

like an individual a company or trustee loan serviceability will vary from lender to lender.

 

Thanks Rolf.

 

Does anyone know if BOQ lend to trusts and ignore other trust assets and mortgages as long as there is an accountant letter?

 

Ultimately this type of set up can result in "people" borrowing way more than they should. It sometimes seems like a good idea to get around the banks rules but this is taking the P$$S IMO. You may end up with one more property but you will end up a mortgage prisoner stcuck on higher rates without being able to refinance. Avoid.

 

A lot of different terminology gets used when people discuss this.

Do the trusts have to be cashflow positive or profitable (accounting profit) or have positive taxable income?

 

An accountants letter generally will not lie to disregard trust liabilities and a prudent lender will want financials / tax for the trust. The lender also credit checks the trustee and will review trusts assets and liabilities and if thats a company and there is another loan it should appear on a credit check. Accountants letters for trusts commonly address that trusts liabilities for related parties are a unpaid commitment rather than one with financial commitments. Bank loans for a trust wont bypass a lender. BUT where a trustee borrows from an associate then its possible they may not dwell deeply and wont assess it twice. But when I issue an accountants letter I will indicate if a specific indebtedness eg to Peter has a onlet amount he borrowed I would indicate that fact. I could be struck off if reported to a professional body for being dishonest.

 

It depends who the trustee is and who the borrower is.

 

Hi Rolf, thanks for this! do you know who the lenders might be please?

 

Thank you so much Rolf