What are family trust loans?

You can use your family trust to access some home loan products. However, lenders treat family trust loans differently to standard home loans.

What is a family trust loan?

Family trust loans are a type of loan where the trustee takes out a loan on behalf of trust beneficiaries, who are often required to act as guarantors.

It is possible to use your family trust to invest in property. However, you may find that lenders treat family trust loans differently than standard home loans.

Requirements vary, but family trust loans can be acquired with a LVR of 95% with some lenders. Trustees are typically required to act as guarantors on a family trust loan although there are exemptions.

Family trust loans provide a range of benefits, including asset protection and being tax effective.

This article explains everything you need to know about family trust loans.

Win 3 Million Velocity Points

For more information, click here.

What is a family trust?

A family trust is a legal financial arrangement that enables individuals or families to manage and distribute assets such as property.

In short, it is a structure with a trustee that holds assets for beneficiaries. Trustee refers to who holds assets (for example, mum and dad) for the benefit of others while 'beneficiaries' are those who receive assets (children).

Under a family trust, the trustee manages assets held by the trust on behalf of the beneficiaries. They’re simpler than most other trust structures, which has led to many investors using them to secure home loans.

No individual owns the assets in a family trust. Instead, they’re owned by the trust itself, with the trustee managing the distribution of any income the trust generates. This is done upon the conclusion of each financial year. Furthermore, the trustee can help the beneficiaries with any tax benefits the trust may provide.

The trust can borrow and invest in a similar way to an individual. However, all assets that require trust funds must be held in the trust.

Can family trusts borrow money in Australia?

Yes, family trusts can borrow money through mortgages and other products. This is commonly done to invest in property that is held in trust for beneficiaries.

However, there are important rules around family trust lending you will need to keep in mind.

Why use a family trust to borrow money?

Family trusts offer several benefits that you won’t have access to as an individual borrower.

For example, you can use the trust to distribute income to younger family members. You could do this to lower your tax bill, although you should seek professional advice before doing so.

Furthermore, many people use family trusts to bypass traditional estate planning. This is because trusts have deeds - legal documents that set out strict rules for the fund. Deeds can be useful upon a trust member's passing.

Family trusts also offer asset protection. Creditors and debt collectors cannot cannot come after assets held in a family trust if you run into financial problems. The trust can also protect assets in other circumstances like marriage failure or business failure.

How do lenders look at family trusts?

Many Australian lenders don't offer home loan products to family trusts. This is because the trusts remove the requirement for personal liability, potentially making it riskier for lenders.

Some lenders might refer you to a commercial lending department which typically has higher fees and interest

However, UNO has brokers who specialise in family trust lending. We can help you find lenders that offer home loan products for family trusts.

Do family trust beneficiaries need to act as guarantors on a loan?

Lenders typically require all trust members over the age of 18 to act as guarantors on a loan, ensuring personal liability for a family trust loan.

Each guarantor must provide the lender with evidence of income, assets, liabilities, and other information.

This shares the responsibility for the property between each member of the trust, which lowers the risk for the lender.

Lenders often reject loan applications if an adult beneficiary refuses to act as a guarantor.
If you are looking for a family trust loan that doesn't require all members to act as guarantors, a UNO broker could help you.

How much can a family trust borrow?

(LVR) ratios of 95%, meaning a deposit of 5% of the loan's value will be required.

Your LVR and the amount you can borrow varies between lenders. Lenders who specialise in family trust loans might offer a different LVR to a bank.

The LVR may decrease to 80% for
which can be offered to family trusts.

Generally, you will find it easier to borrow as a family trust if the trustee is an individual rather than a company. Even so, there are still some lenders that allow you to borrow under these circumstances.

What to do next

You should always speak with a financial professional before setting up a family trust. They will be able to provide more information about the trust structure.

Talk to UNO today

Further reading

Win 3 Million Velocity Points

Book Call Now

UNO home loans


What our customers are saying

Gabe Windsor
October 26, 2023
What a fantastic experience using UNO Home Loans. Mike Parsons and the team were exceptional. Such an easy, hassle free experience, cannot recommend them highly enough. Mike Parsons was in touch every step of the way, and with him doing all the leg work, the transition to a refinanced home loan was a very easy one. Thank you!
Read more
Laurisa Sticotti
July 1, 2023
Scott Wilkinson has been fantastic when dealing with my broking needs. He has held my hand through every step of the way and has made purchasing my first home a much more comfortable experience than I anticipated.
Read more
Thusi Gamage
July 1, 2023
Awesome team, Very reliable and friendly. Scott Wilkinson is very experienced and knowledgeable.He guided us throughout the process and was available to help.
Read more
Omar Zazou
June 1, 2023
I have worked with Scott Wilkinson to get my home loan and he has been a massive help to navigate my first home purchase. He has taken care of all the financial details and I didn't need to worry about anything. Highly recommend him for his professionalism, patience and support!
Read more
Kelly O'Connor
June 1, 2023
You won’t find any broker better than Anita at UNO. We’ve told all our friends and family about her and will be using her for all our mortgages in the future! A stress free process from the start. She listened to our needs and was always available.
Read more
Ashley Morson
We are truly grateful for uno home loans and our broker Karis Churchill. This is our second time purchasing a home with the help from Uno and both times have been a very positive experience. Our recent purchase had many obstacles due to different factors however it was our dream home and we were up for the challenge. Our broker Karis was a true support and went above and beyond. She communicated so well with our solicitor and the real estate agents. She kept us updated through every step and kept us motivated when things seemed impossible. Uno is very fortunate to have Karis as a broker and we would highly recommend her to anyone. Our family are so happy we are now in our new forever home. Thank you so much Karis and to the uno team!!!
Read more
Ebubekir Demir
Thank you Eren for your quick and efficient turn around time to getting an approval for a loan. Will be recommending you to anyone that needs a quick and reliable loan.
Read more
No items found.