Discretionary Trust Loans

What is a discretionary trust?

A discretionary trust is different to a unit trust in that the income from the assets in the trust can be distributed at the discretion of the trustee, depending on any restrictions in the trust deed. Typically, most discretionary trusts have nominated beneficiaries in the discretionary trust deed which allows income to be distributed to these beneficiaries as well as their family or friends.

One of the major benefits of Discretionary Trusts is that income from the trust can be distributed “as the trustee sees fit”, which is usually to the beneficiaries with the lowest taxable income. Discretionary trusts are also used to protect assets in the event that one of the beneficiaries becomes bankrupt, insolvent or has a marriage breakdown. It is also a useful strategy for people that are at a higher risk of legal action ( eg. Doctors ) as a way of minimizing asset exposure should legal action ever be taken against the person.

How do banks view discretionary trusts?

Around half of the lenders in Australia will decline loan applications for discretionary trusts. Many will instead refer you to their business banking department who will then charge a higher rate and additional fees.

The secret to getting your loan approved as a cheaper and simpler residential loan is to know which banks and other lenders can consider a discretionary trust, as well as accept the other aspects of your loan application. We are specialist mortgage brokers and can help to find a lender that will approve your mortgage.

How much can you borrow?

Standard loans (full doc): 95% of the property value.

Investment loans: 95% of the property value.

Low doc (no income evidence): 80% of the property value.

Discounts: Competitive professional package and basic loan discounts are available.

Note: Low doc discretionary trust loans are only available from a few lenders, please discuss with us before you begin looking to buy a property. Some lenders have restrictions on lending to discretionary trusts with a company as the trustee, but can accept trusts with a personal trustee.

Why do you need an expert mortgage broker?

Due to the complexity of trust loans and the fact that many banks will try to give you a more expensive business loan, it is critical that you obtain the help of an expert to finance your loan.

• We know which lenders will approve loans for discretionary trusts.
• We can get your loan approved with lenders that have fewer fees for guarantee & indemnity documents.
• We know how to structure loans with the correct entities as borrowers and mortgagors.
• For the majority of trust loans our services are completely free!