Westpac lending policy for individual?

Discussion in 'Loans & Mortgage Brokers' started by FXD, 20th May, 2019.

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  1. FXD

    FXD Well-Known Member

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    Hi experts,

    Like to run this hear say by you guys.

    Over a catch up with some friends over weekend, one of the guys was telling us that
    Westpac lending for individual does NOT take into all other non consumer debts into
    consideration even if the individual may be giving personal guarantee to other related
    entities like company and trusts, where the same individual maybe a guranteeing director.

    This sounds too good to be true to me in this climate and environment. I have run the
    same query by my broker and awaiting a formal response.

    Has anyone of you had the same experience with this?

    Thanks,
    FXD
     
  2. Shahin_Afarin

    Shahin_Afarin Residential and Commercial Broker Business Member

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    That's correct and a Westpac policy niche.

    They do not include company liabilities in the personal application as they consider a company to be a seperate legal entity.

    St George is a policy that is slightly similar to this but they do require a letter from the Accountant confirming that the entity can meet its own obligations.

    This is where strategic lending comes into play especially when you have purchased properties under company/trust entities.
     
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  3. Rolf Latham

    Rolf Latham Inciteful (sic) Staff Member Business Plus Member

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    they also dont take into account the income and the asset side of the equation.

    There are other lenders that have that policy exclusion, but wbc is the most common

    ta
    rolf
     
  4. FXD

    FXD Well-Known Member

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    Does "strategic" in this case mean one should never borrow in his/her own name for a variety of
    reason? :)

    Anyway, heard back from my broker confirming the same with WBC today, though he
    downplayed the relevance for me as PPOR and an IP are in my name.

    However, he did suggest I consider re-finance the IP using a company as actual borrower with me as director
    giving personal guarantee with the IP in my name as security. After that, he may be
    able to help me re-finance PPOR to WBC and hopefully even further LOC cash out
    investment. Not sure if it will work though.


    Rgds,
    FXD
     
    Last edited: 21st May, 2019
  5. Rolf Latham

    Rolf Latham Inciteful (sic) Staff Member Business Plus Member

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    sounds rather complicated

    ta

    rolf
     
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  6. Terry_w

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

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    How does this work if you are the owner?
    You could provide a mortgage and guarantee for the company, but what is the company going to do with the money? What about the original loan? What about the deductibility of interest? Division 7A - a company providing a benefit to a shareholder or an associate of a shareholder.

    Make sure you get legal and tax advice before going down this route.
     
  7. FXD

    FXD Well-Known Member

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    I am not 100% sure about the real/actual working details, his theoretical explanation is:

    1. Existing IP valued at $100 with existing mortgage of $70 (LVR 70%) with lender Y (not WBC).
    2. My company MyCo plans to borrow secured loan of $10 from lender X (not WBC) for biz.
    3. As director, I provide personal guarantee for MyCo and specifically pledge the IP as security
    to lender X. This is where I am not 100% sure as my understanding of PG is any asset in my
    name as far as creditor is concerned and I don't get to hand pick!
    4. The need for new lender X is that my servicing maxes out with Y so can't increase LVR to
    80% to give MyCo $10. Whereas X happy with 80% LVR of same IP.
    5. With the IP as security, X will pay out Y's $70 mortgage plus $10 for the company for biz
    purpose. Effectively, MyCo carries a $80 mortgage with X guaranteed by me with the IP.

    If the above works, NG tax deduction is not the primary concern/motivation at the moment as
    MyCo biz should generate sufficient revenue to pay the director (me) an income. :)

    My preference is to use equity in IP to provide fund for MyCo biz ahead of PPOR equity.
    The bit where personal borrowing with WBC comes into picture only if/when MyCo needs more
    working capital and he suggests refinance PPOR to WBC next without the original IP mortgage
    in my name and should/may help stretch my borrowing with WBC lending policy.

    As I said, I am not 100% sure if or how above works at all but my broker assured me he's
    done this before for other clients.

    Thanks,
    FXD
     
    Last edited: 22nd May, 2019
  8. Terry_w

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

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    Your broker is over stepping the mark here.
    The company is making a $70k benefit to the shareholder/associate by paying out its loan. This would likely be taxed as a dividend. You could potentially enter into a Div7A loan agreement with the company so that you borrow from it to pay out the original loan, but this would be tricky to manage.

    This should not be contemplated without complex legal and tax advice which would be expensive. Not something that I would want to take on due to the risk and complexity.

    Hope he recommended legal advice be sought to the clients as he/she could be at risk if a client is audited and he/she is sued.
     
  9. Mike A

    Mike A Accountant Business Member

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    I heard at a bbq eating broken glass was also a good idea.
     
  10. Terry_w

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

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    lol, hope you didn't eat the sausages?