Buying property through a company name
Many investors decide to buy or refinance their property in the name of a Pty Ltd company for a variety of asset protection and taxation reasons.
However, banks treat these loans differently than standard home loans!
Here’s what you need to know about qualifying for a company home loan.
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How much can I borrow?
Depending on your situation, you may be able to borrow up to:
- 95% of the property value to buy a standard property as an investment property.
- 80% of the property value if you’re applying for a company low doc home loan.
- Case by case if you’re buying a commercial property.
Each lender has their own maximum loan amount and applicable lending guidelines.
If you’d like our help to apply for a loan in a company name, please fill in our free assessment form or call us on 1300 889 743 and one of our specialist mortgage brokers will contact you to discuss your options.
The hidden catches
Not every bank is set up to lend to company structures!
This may be because their system cannot process company loans or their credit staff aren’t trained on how to assess company loan applications.
- Have unreasonable requests such as asking for tax returns for a shelf company that has just been set up!
- Don’t offer professional package discounts to loans in a company name.
- Offer professional packages that come with additional products such as an offset account or a credit card but won’t allow these to be in a company name.
- Won’t approve a line of credit in the name of a company as they consider this to be a business loan.
- Require all shareholders to be guarantors of the loan.
For this reason, it’s critical to apply with the right lender, one who can give you an excellent discount, has the experience to assess company loans properly and won’t have system issues with accounts being in the incorrect name or features that you can’t use.
To find out which lender offers the most competitive loan package, please contact us on 1300 889 743 or fill in our free assessment form today.
Company loan structure
When you borrow in the name of a company, the company will own the investment property, the company will be the borrower and all directors of the company will be required to guarantee the loan.
Shareholders and company secretaries aren’t usually required to be a guarantor.
For example, let’s say that John Smith is the director of ABC Pty Ltd.
Both he and his wife Joan Smith each own 50% ofthe shares in the company.
If they buy an investment property for the company, the loan would be setup as follows:
Borrower: ABC Pty Ltd.
Mortgagor: ABC Pty Ltd (ABC Pty Ltd is the owner of the investment property).
Guarantor: John Smith (Joan isn’t required to be a guarantor as she’s not a director).
Buying property through a company can be complicated!
Can a trustee company borrow money?
If you have a company as trustee for a trust then it can borrow In It’s Own Right (IIOR) and AsTrustee For (ATF) the trust.
Lenders refer to this structure as a trust loan with a corporate trustee.
The lender will ask for a copy of the company constitution and the trust deed to confirm that the legal structure is acceptable before approving the loan.
The amount you can borrow, the structure of the loan and the applicable lending guidelines will depend on the type of trust that you have.
How do the banks view company home loans?
What many property investors don’t know is that it’s often harder to get approved for a standard home loan when borrowing under a company name than if you were to borrow in your own name.
In fact, some banks refer these loans to their business banking division and charge higher interest rates
This is despite the fact that there’s very little difference between buying in a company name or an individual’s name.
Luckily, our mortgage brokers are experts in company home loans and can pair you with a lender that will approve your loan.
To get leading market interest rates, speak to us today on 1300 889 743 or complete our free assessment form.
Are the directors responsible for the loan?
It’s a common misconception that if a loan is in a Pty Ltd company name the directors aren’t liable for it.
If the company is unable to pay the loan, the bank can call on the director to pay the debt.
This is because before approving the loan, the bank will require the director to guarantee the loan.
How are directors liable?
All directors are “joint & severally liable” for the loan, which means that if there are two or more directors, the bank can still choose to claim the entire debt from either director.
In other words, if you’re buying a property with several business partners as a joint venture, the bank has the right to pursue any and all of you for the missed payments even if only one of you was unable to make their share of the repayments.
Are shareholders responsible for the loan?
Generally speaking, shareholders aren’t required to guarantee standard residential investment loans.
Although, in many Pty Ltd companies, the directors and shareholders are one in the same.
However, there are major shareholders who are not directors of the company applying for the mortgage.
In these cases, the bank will assess the loan on its merits and may require a guarantee from the shareholder as well.
What about business loans?
This page is for people buying or refinancing a property that is owned by a Pty Ltd company not for business owners looking for a loan for business purposes.
Please refer to our business loans page if you’d like to borrow money for your business.
Let us help you get a loan for your company!
Our mortgage brokers are experts in setting up home loans in the name of a company!
Whether it’s a simple company with one or two directors or a large joint venture with many partners, we can help you get approved.
We can quickly work out if you’re qualified for a loan and we know which lenders will give you the best possible interest rate.
Please contact us on 1300 889 743 or complete our free assessment form and one of our specialist mortgage brokers will give you a call to discuss your situation.