Can a company or trust be the borrower on a home loan?

Many investors and business owners prefer to hold property in a company or a trust rather than their personal name, for asset protection or tax planning reasons. Financing within these structures is possible, but it is more specialised. Here is how lenders tend to approach it.

Borrowing in a company or trust

A residential loan can be structured with a company, such as a Pty Ltd, or a trust with a corporate trustee as the borrower, rather than an individual. The property is then held within that structure. This is commonly done for asset protection, estate planning or tax reasons, depending on the situation.

Personal guarantees are usual

Even where a company or trust is the borrower, lenders generally require the directors, or the beneficiaries or trustees, to provide personal guarantees. This means the individuals behind the structure remain responsible for the loan, so the structure does not remove personal liability for the debt.

Not all lenders accept these structures

Lending to companies and trusts for residential property is offered by some lenders but not all, and those that do vary in the structures they accept and the documentation they require. More complex structures, such as a trust with a corporate trustee, may narrow the field of willing lenders further.

More documentation is normal

These arrangements generally require more documentation, including the company or trust details, the trust deed where relevant, financial statements, and identification and guarantees for the individuals involved. The clearer and more complete the documentation, the more comfortable a lender can be.

The structure affects assessment

How the income and the structure are assessed can differ from a standard personal loan, including how income flowing through the company or trust is treated. The way the structure is set up interacts with both the lending and the tax position, which is why advice matters.

Tax and legal advice is important

Choosing to borrow through a company or trust has significant tax and legal implications that depend on your circumstances. These are matters for your accountant and legal adviser, not lending questions, and getting the structure wrong can be costly to unwind, so advice should come first.

Match the structure to the right lender

Because not all lenders accept these structures, the useful step is to match your company or trust arrangement to a lender comfortable with it. A broker who works with these structures can identify suitable lenders, usually at no cost to you, while your accountant and lawyer advise on the structure. This is general information, not tax, legal or financial advice.