The Active Home Loan Manager

What are family trust home loans?

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

Family trusts are a form of discretionary trust in which each trust member is part of the same family. The trustee chooses how the income the trust generates is distributed to its beneficiaries.

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

Why use a family trust?

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 can do this to lower your tax bill.

Furthermore, many people use family trusts to bypass traditional estate planning. For example, the trust deed prevents disputes over assets. This may prove useful upon a trust member’s passing.

You can also use your family trust for asset protection. Creditors cannot come after any trust assets if you run into personal financial problems. Furthermore, the trust allows you to protect assets in other circumstances. These may include your marriage ending or your business failing.

How do lenders look at family trusts?

About half of Australian lenders refuse to offer home loan products to family trusts. This is because the trust structure can preclude personality liability.

Instead the lender may refer you to their commercial department, which means higher fees and interest rates. However, we can help you to find lenders that offer home loan products for family trusts.

Do beneficiaries need to act as guarantors?

Often lenders will require that every trust member who is over the age of 18 act as a guarantor on the loan. This ensures personal liability for a family trust home loan.

Each guarantor would need to provide the lender evidence of:

  • income,
  • assets,
  • liabilities and
  • any other information required.

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

However, you’ll run into issues if an adult beneficiary refuses to act as a guarantor. Many lenders reject such applications.

Fortunately there are some lenders that do offer family trust loans without requiring all adult members to act as guarantors. A uno adviser can inform you of these lenders, and help you find the home loan you want.

What can my trust borrow?

The amount your trust can borrow varies between lenders. For example, you may be able to borrow more from a lender that understands the family trust structure.

Some lenders offer investment property home loans with loan-to-value ratios of 95%. This may fall to 80% in the case of low-doc loans. Some lenders also offer discounts on professional packages.

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.

You should also do the following:

  • Read more information about guarantor home loans;
  • Calculate how much you may be able to borrow;
  • Live chat with an uno home loan consultant about family trusts.

This information is general in nature and you should always seek professional advice when making financial decisions.

This information in this article is general only and does not take into account your individual circumstances. It should not be relied upon to make any financial decisions. uno can’t make a recommendation until we complete an assessment of your requirements and objectives and your financial position. Interest rates, and other product information included in this article, are subject to change at any time at the complete discretion of each lender.

Add a Comment

Alexi Neocleous

With over 20 years experience, Alexi has written extensively a wide cross section of financial topics. These topics range from financial planning, mortgages, property commentary and all points in between.

Blog

You might also be interested in

uno lifts off new partnership with Velocity Frequent Flyer

At uno, our mission is to ensure our customers are always on a great deal – and that’s not just on their home loan. Today, we are able to announce an exciting new partnership with Velocity Frequent Flyer, the award-winning loyalty program of Virgin Australia.  This partnership means we are able to bring more great

Lenders roll out emergency bushfire package for affected communities

A number of home loan lenders have announced special measures and emergency packages to assist those affected by the ongoing bushfires.  We have compiled a list of lenders, contact numbers and links to their websites to help you get in touch quickly and get the support you need.  Below is a list of some of

The three wise benefits of refinancing

“Last Christmas, I forgot to refinanceSo the very next day, I still had to payThis year, to save me from tearsI’ll refinance with someone special…“ It’s a bit cringey, isn’t it? But while I’m clearly no George Michael in the song writing department, I do know a thing or three about refinancing mortgages. Don’t spend

Search.
Compare.
Settle.
Strut.

Get started

Find out if your home loan is any good

Get your loanScore