A director’s liability in a company home loan?

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marylamb
Posts: 47
Joined: Wed Jun 17, 2009 5:44 pm

A director’s liability in a company home loan?

Post by marylamb »

Hello home loan experts,

I’m the director of a fashion studio in London. I’ve heard that Australian properties are considered good investments. As I’ve already invested in a few properties here, I was thinking of investing in a property in Australia as well.

I want to take out a mortgage under my company’s name to finance the purchase. Since the loan will be under the company name, I want to know what role I will have as the director of the company. Can anyone please help me understand this?

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Otto Dargan
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Re: A director’s liability in a company home loan?

Post by Otto Dargan »

Hi and welcome to the forums marylamb,

If you are applying for a home loan under a company name, then the director of the relevant company may be required to guarantee the loan before it can be approved. Simply put, the director becomes liable if the company is unable to repay the loan.

Many people may have the misconception that directors are not liable for a loan if it is under a company name. However, the lenders may consider all directors for joint and several liability.

This means that in case there are two or more directors in a company, lenders may claim either director for the entire loan. It also means that if one of you is unable to make your share then the lender has the right to pursue any or all of you for the missed payments.

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

marylamb
Posts: 47
Joined: Wed Jun 17, 2009 5:44 pm

Re: A director’s liability in a company home loan?

Post by marylamb »

Hello there, Otto. Thanks for the information but I’m still not completely clear about the subject. Could you care to explain a little about how my application will be assessed?

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Otto Dargan
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Re: A director’s liability in a company home loan?

Post by Otto Dargan »

Hi marylamb,

You should keep in mind that a lender may not always be qualified to lend to company structures because of various reasons.

One of the reasons may be that the system they use to process loan applications may be unsuitable for processing company loans. Another reason could be that their credit staff may not have been trained to assess company loan applications. You may also find a few lenders who may make simple mistakes such as requesting tax returns for a newly set up company.

It is recommended that you apply with a lender that has the experience to properly assess company loans. It may also be necessary to ensure that they do not have system issues regarding the names and features of an account.

You can have a look at our website if you want to know more about how home loans under company names are assessed. You can also call us on our overseas number +612 8068 2257 or fill in our free assessment form to find out how we can help you.

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

marylamb
Posts: 47
Joined: Wed Jun 17, 2009 5:44 pm

Re: A director’s liability in a company home loan?

Post by marylamb »

I’m scheduled to be in Australia next week to personally see the properties I want to purchase. I’ll give you a call then to schedule a meeting to further discuss my situation. I really appreciate your help, Otto.

Have a great day.

neonlights
Posts: 38
Joined: Fri Jul 26, 2013 7:04 pm

Re: A director’s liability in a company home loan?

Post by neonlights »

Hi everyone,

Like marylamb, I’m also the director of a company. It’s a small scale automobiles manufacturing company in Rockhampton. We recently set up a trust here under the company’s name.

We want to move the company to a bigger building and we are thinking of using the trust for that purpose. But we aren’t sure how we can get a home loan for a trust under a company name.

What will I need to prepare before applying for the loan?

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Otto Dargan
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Re: A director’s liability in a company home loan?

Post by Otto Dargan »

Hi neonlights,

Lenders may request you for a copy of the company constitution and the trust deed. This will help them confirm the eligibility of the legal structure of your company. The loan amount, loan structure, and the application lending guidelines may depend on the type of trust that you have.

Please note that the power a trustee holds may vary according to the lender who issues the deed. The trustee may not have many limitations on its powers, so long as its duties are carried out in the best interest of the beneficiaries.

Lenders may want to make sure that the trustee has the power to apply for loans on the trust’s behalf. This is another reason why they may check your trust deed. Lenders may not lend money to trustees with trust deeds that were set up particularly to borrow money, known as Property Investor Trusts (PITs).

It is recommended that you choose your accountant carefully to avoid this problem. You can also check out our website for more information on borrowing with a trust under a company name.

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

neonlights
Posts: 38
Joined: Fri Jul 26, 2013 7:04 pm

Re: A director’s liability in a company home loan?

Post by neonlights »

Thanks so much for the information! I found your website to be very informative as well. Since I find this situation a bit complicated, I’d like to hire your services in order to get the loan. I’ll call you next week and we can have a proper discussion on this matter.

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