Our team is highly experienced with complex loan scenarios, from trust purchases of residential and commercial property (for both owner occupied and investment purposes), to SMSF purchases, loans with multiple securities, self-employed borrowers and so much more. With our 30 years of experience, we've picked up on a few tips and tricks for these complex purchases, so we've outlined the most important things you should know about buying property through a trust.
Why buy through a trust?
Buying property through can result in a number of tax benefits. The trust will have its own TFN and will be required to lodge a state tax return. If the trustee distributes the income from an investment property in a financial year, given some beneficiaries may be in lower tax brackets, this distribution of wealth can result in considerable tax breaks for members of the trust, compared to if they had bought the investment property themselves.
Additionally, a trust can help protect your assets. Since the trustee is the owner of all the assets, if you face legal action or financial hardship, the investment property will be more protected from creditors or the law.
A trust can also make it easier to transfer the ownership of a property. The trust deed should specify how trustees should proceed, this can help people avoid legal trouble and the drama that can come with executing estates or transferring property. It also may help reduce taxes and government expenses that come with transfer duty.
Financing a trust purchase
A trust is considered a more complex structure in terms of applying for loans. this is because lenders see them as higher risk, due to the legal frameworks operating within a trust. This is why using a broker will give you the best possible chances of loan approval, we know what is going to look good to lenders and what isn't. generally speaking, they will want to know what kind of trust is applying for the loan, the credit checks on all the members of the trust as well as the trust itself, and will often require the beneficiaries to guarantee the loan. Lenders will also need to see the trust deed, possible tax returns and other financials.
To summarise, a lender will look at (at least) the following; the nature of the trust, the finances of the trust, the trust deed, the trustees and beneficiaries, finances of the guarantors, the potential investment income that can be accrued form the trust property.
Not all lenders will lend to trusts, and some will only lend to certain kinds of trusts (i.e. discretionary trusts and not SMSF trusts) so its important to sit down with a broker to discuss your options.