Family Trust Loans

What is a family trust?

Couple outside their homeFamily trusts are a type of discretionary trust where the beneficiaries of the trust are all related. For this reason they are often referred to as a “family discretionary trust”. Just like with a discretionary trust, the trustee can distribute income as they see fit to the various family members and their friends.

This has the benefit that income/profits from the trust can be distributed to the children or young adults that have lower taxable incomes. Discretionary trusts are also used to assist protect assets in the event that one of the family members has a business failure or marriage breakdown. Some families use a family trust as a method of passing assets to future generations.

How do banks view family trusts?

Banks view family trusts in much the same way as they view discretionary trusts. Around half of the Australian lenders will decline loans for discretionary trusts. Many will instead refer you to their business banking department who will then charge a higher rate and additional fees.

We have mortgage brokers that specialise in family trust lending and can find a lender to approve your mortgage with a normal residential loan with professional package discounts.

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

The beneficiary problem

Property investors often see their accountant, setup their trust, then go to their bank to get a pre-approval. The problem then arises that their bank wants all of their adult beneficiaries to be guarantors for the loan!

This means that if they have put their son, daughter, spouse, a friend, parents & anyone else they can find down as beneficiaries that they can’t get a loan without all of them being on the loan too. They would all need to provide income, asset & liability details as well have meet other borrowing criteria. This becomes incredibly cumbersome, and of course many beneficiaries do not want to be personally responsible for the family trust’s loan.

The solution? Not every lender requires beneficiaries to be guarantors. The secret is applying with a lender that has competitive pricing and a reasonable policy regarding the way they view beneficiaries. Please contact us and one of our mortgage brokers will help you to find the best solution for your situation.

Which banks can approve loans for family trusts?

Unfortunately it isn’t as simple as just knowing which lenders will consider loans for family trusts. Lenders are constantly updating their guidelines for both family trust loans and family trust low doc loans.

We can help you by looking at your entire situation and finding a few lenders that lend to trusts for you to choose from.

  • We know which lenders will approve loans for family trusts.
  • We know which lenders can accept family trust loans without the need for beneficiaries to be guarantors.
  • 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. We’ll even discuss this with your accountant to be 100% sure.
  • For the majority of family trust loans our services are completely free!

Do you need the help of an expert mortgage broker? Our brokers are all trained to handle trusts, and will actually understand what it is you are looking to do! Please enquire online and one of our brokers will help you to select the best lender and apply for a home loan.