Trust Loans
Trust loans enable a borrower to secure financing with the help of a trusted individual using their assets as collateral.
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Many choose a trust to buy investment properties due to the asset protection and tax benefits it provides.
Unfortunately, many lenders struggle to structure trust loans correctly, which can cause borrowers to miss out on valuable tax benefits.
What do banks look for?
When a lender reviews a trust application, they conduct a comprehensive credit assessment to determine whether to approve the loan.
When assessing the loan they tend to look for:
We know what the banks look for when it comes to trusts!
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What additional documents do the banks need?
There are several documents that the bank will need from you in order to process a loan for a trust:
Is It Possible For Trusts To Get Discounted Loans?
Yes! The key to loan approval is knowing which lender can work with your specific trust type and loan amount.
It’s important to make sure that the lender processes your loan as a residential loan and not a commercial loan, otherwise you’ll pay more fees and a higher rate.
In addition to this, many lenders cannot approve residential loans for trusts at all, which leaves many people wondering how they will be able to buy an investment property in a trust.
How do lenders view trusts?
Banks and other lenders in Australia tend to view trusts as extra work for them without any extra reward.
Trust applications are very complex, often with legal issues to consider, as well as more extensive paperwork to complete before approving the loan.
The majority of bank managers, mortgage brokers and credit staff don’t understand how trusts work so trust applications tend to get bounced between bank departments, resulting in delays and errors.
On top of this, many bank managers don’t actually know if their own bank does trust loans as many banks have ambiguous credit policies.
One of Australia’s major banks in particular can’t lend residential loans for trusts simply because their computer system can’t handle them!
We are mortgage brokers that specialise in financing loans for trusts.
Why doesn’t every bank lend to trusts?
Many banks believe that loans to some types of trusts could be legally unenforceable in the event that the borrower can’t repay the loan.
Furthermore, many lenders are worried that the Australian Taxation Office (ATO) may change taxation rulings about trusts, which in turn will affect the people they have lent money to.
The main reason that most lenders don’t lend to trusts is because trust loans are less profitable to them as a result to extra work of preparing mortgage documents and the checking of the trust deed.
How do banks get around these problems?
The major banks tend to refer many enquiries about borrowing using a trust to their business banking department.
This works well for the bank as more experienced staff handle the loan. However, the customer is often charged a higher rate and more fees, making it more expensive to get their loan approved.
Business banking is slow, expensive, may not include a low doc option and tends to allow you to borrow far less than you can with a residential loan.
We know lenders with lower fees and competitive rates!
Do lenders charge additional fees for trust loans?
Yes, all lenders will charge additional fees for lending money to a trust.
This is reasonable because there’s additional work to be completed in preparing the guarantee and indemnity documents for the trustee and the beneficiaries (if applicable) to sign.
In most cases, the additional legal fees charged by the bank are between $200 and $500.
Can the loan be in my name?
Yes, it’s possible to setup the loan to be in the name of the trustee or director of the trustee instead of being in the trust name.
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:
Mortgagor / property owner: ABC Pty Ltd As Trustee For The Smith Unit Trust
Guarantor: 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
Note that some banks don’t accept the second loan structure listed above.
Please talk to your accountant for tax advice regarding the different structures.
Can I sell my property to my trust?
Yes, it’s possible to get approval for a low doc trust loan.
A low doc loan will allow you to declare your income rather than providing tax returns as proof of your income.
Are there low doc loans for trusts?
Yes, it’s possible to get approval for a low doc trust loan.
A low doc loan will allow you to declare your income rather than providing tax returns as proof of your income.
What is a trust?
A trust is an arrangement which allows a person or company to own assets on behalf of another person, family or group of people. These people are known as the beneficiaries of the trust.
Assets are owned on behalf of beneficiaries but controlled by a trustee, who can be either a company or a person.
The trustee is governed by a trust deed which sets out the rules that the trustee must follow and also covers how profit is distributed to the beneficiaries.
Benefits of buying property in a trust name
Tax benefits
You may be able to reduce your tax bill by distributing income to family members with lower taxable income.
Asset protection
Trusts allow you to control and receive income from assets without having them in your name.
This may protect these assets in the event that you’re sued or you go through a divorce.
Estate planning
Some trusts may allow you to effectively pass assets on to future generations without paying excessive taxes or going through estate disputes.
Drawbacks of buying property in a trust name
Borrowing with a trust is possible!
At Sunrise Finance WA, we assist you in making sure all aspects of your trust loan are perfect for maximum returns on your investments.
We know how a trust works and which lenders accept which kinds of trusts.
Do beneficiaries need to guarantee a loan for a trust?
Borrowing with a trust is possible!
At Sunrise Finance WA, we assist you in making sure all aspects of your trust loan are perfect for maximum returns on your investments.
We know how a trust works and which lenders accept which kinds of trusts.
Apply for a loan in a trust
Borrowing with a trust is possible!
At Sunrise Finance WA, we assist you in making sure all aspects of your trust loan are perfect for maximum returns on your investments.
We know how a trust works and which lenders accept which kinds of trusts.
Related Topics
Tailored Loan Solutions
Access loans specifically structured to suit the unique needs of discretionary, unit, or family trusts, ensuring compliance and flexibility.
Investment Opportunities
Leverage trust loans to invest in property, shares, or other assets while maintaining the benefits of holding them in a trust structure.
Asset Protection
Trust loans help you secure assets within a trust, offering a layer of protection against personal liabilities or external risks.
Tax Efficiency
Maximise tax benefits by structuring your loan within a trust, potentially enabling income distribution to beneficiaries in lower tax brackets.
Flexible Repayment Terms
Enjoy flexible loan terms tailored to the cash flow and financial strategies of the trust, ensuring smoother management of repayments.
Specialised Lending Support
Work with lenders experienced in trust loans, ensuring a smoother application process and customised advice to meet your trust’s goals.
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