Trust Loan
What is a Trust?
A trust is an arrangement that allows individuals or companies to hold assets on behalf of another person, family, or group. These individuals are referred to as beneficiaries, while the assets are controlled by trustees who can be either companies or individuals. Trustees are governed by a trust deed that outlines the rules they must follow and covers how profits are distributed to the beneficiaries.
Benefits of Purchasing Properties in the Name of a Trust
01.
Asset Protection
02.
Tax Benefits
03.
Estate Planning
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Trusts enable you to control assets and receive income without having them registered in your name. This protection can safeguard these assets in case of lawsuits or divorce.
You can reduce your tax liability by distributing income to family members with lower taxable income.
Certain trusts facilitate efficient transfer of assets to descendants, reducing excessive taxation and potential estate disputes.
Drawbacks of Purchasing Properties in the Name of a Trust
01.
Deferred Tax Benefits
02.
Higher Accounting fees
03.
Mortgage structure is critical
Immediate tax advantages may not be realized. It might take some time to offset any losses incurred due to owning and managing the property, to claim future tax benefits.
Set-up costs and annual accounting fees can be higher when owning a property in a trust due to the added complexity of tax returns.
This isn’t a drawback as much as it is a huge risk to be aware of.
Using a mortgage broker that has experience with trust loans will help you to get approved for finance that works for you.
Points to Consider Before Using a Trust to Purchase Properties
Before utilizing a trust to buy properties, it is essential to consult with your accountant. This ensures the correct construction of trust loans to maximize tax benefits and asset protection. Accountants can provide professional advice to align your investment strategy with your financial goals and legal requirements.
Which types of trusts are eligible for borrowing money?
The most common trust types used for property investment include:
Discretionary Trust
Family Trust
Unit Trust
Self-Managed Superannuation Fund Trust (SMSF)
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All the aforementioned trust types are eligible for applying for housing loans.
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In addition to the above, there are a few other types of trusts, such as:
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Hybrid Trust (also known as Real Estate Investment Trust or PIT)
Real Estate Investment Trust
Service Trust (usually a form of Discretionary Trust, Unit Trust, or Hybrid Trust)
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Although these trust types are also eligible for applying for housing loans, only a select few lenders approve them. In general, Hybrid Trusts and Company/Corporate Trustee Trusts tend to encounter more challenges in securing financing.
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Interest rate of Trust Loans
We offer competitive discounted interest rates,which can be same as normal loan rate. Feel free to inquire for more information.
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Are there additional fees for trust loans?
Yes, all lenders charge extra fees on trust loan applications
This is reasonable because it involves additional work to prepare guarantee and indemnity documents for trustees and beneficiaries (if applicable).
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Are low-documentation (low-doc) trust loans available?
Yes, low-doc trust loans can be approved.
These loans allow you to declare your income without providing tax returns as proof of income.
Need Expert Advice? Contact Loanbox!
We understand how trusts operate and which lenders accept which types of trusts.
Fill out our free assessment form or call us at 1300 965 688 to speak with a mortgage broker specialized in trust loans.