Which trust structure do mortgage lenders prefer - Discretionary or Unit trusts?

Any general questions you might have in regards to loans and finance.
Skip
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Joined: Wed Jul 10, 2019 6:15 pm

Which trust structure do mortgage lenders prefer - Discretionary or Unit trusts?

Postby Skip » Wed Jul 10, 2019 6:17 pm

Hi, I’ve been consulting my accountant about setting up a trust to purchase another IP (investment property). I’ve been debating between a unit and discretionary trust. I guess my question is how do lenders view trusts? Which trust structure do lenders prefer?

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Otto Dargan
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Re: Which trust structure do mortgage lenders prefer - Discretionary or Unit trusts?

Postby Otto Dargan » Wed Jul 10, 2019 9:47 pm

Hello Skip. Welcome to the forums.

Trust loans are complicated in general and only a few lenders are willing and able to handle discretionary trust loans, even fewer lenders among them are willing to lend to unit trusts. From a strictly mortgage lending perspective, a discretionary trust structure with individual beneficiaries is preferable to unit trusts as it offers more choices in lenders. Another thing to note is that trust structures with a company/ corporate trustees are harder to finance.

Trust loans are more complicated and require experienced staff to assess the documents carefully and to confirm if the trust is allowed to borrow money.

You’ll also want to consider a hybrid trust structure which can take the best-desired features from both discretionary and unit trusts.
As for the suitability of a trust structure, your accountant/financial planner may be able to better assist you in regards to that.

Give us a call on 1300 889 743 or fill in our free assessment form to find out if you qualify for a trust home loan.

Cheers,
Otto Dargan
Mortgage Broker
P | 1300 889 743
Home Loan Experts

Skip
Posts: 2
Joined: Wed Jul 10, 2019 6:15 pm

Re: Which trust structure do mortgage lenders prefer - Discretionary or Unit trusts?

Postby Skip » Thu Jul 11, 2019 2:02 pm

That’s great. What I’m concerned about is the requirement to have all the beneficiaries of the trust as guarantors.
Are there lenders who don’t have this requirement?

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Otto Dargan
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Location: Sydney, Australia
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Re: Which trust structure do mortgage lenders prefer - Discretionary or Unit trusts?

Postby Otto Dargan » Thu Jul 11, 2019 5:51 pm

Hi Skip,

Yes, a couple of our trust loan lenders have offset facilities, however, most don’t.

Please note that the offset account is only allowed in the name of the same entity as the loan. So, you can’t have the offset in your personal name.

Give us a call on 1300 889 743 or fill in our free assessment form to find out which lenders offer trust loans with offset facilities.

Cheers,
Otto Dargan
Mortgage Broker
P | 1300 889 743
Home Loan Experts


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