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Finance problems

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  • Finance problems

    My wife and sister in law have a rental that they inherited a while ago. The ownership structure has two trusts with my wife as the only trustee of both. We don’t want to change the structure for tax and protection reasons.

    We’re trying to refinance and running into problems. The house is worth $940k, is rented for $500/week and we want to increase the mortgage from $150 to $300k. The borrowing would allow for $15,000 for any contingencies.

    My wife is an at home parent and has minimal income. I pay for all family costs comfortably, and we have around $900k of equity.

    We have been to asb (current bank) and ANZ and they both won’t lend to the trusts. The reason being my wife’s income and potential liability for our house.

    Do you know of any bank that would be able to help us out?


  • #2
    How did each Trust come to have only one Trustee? Far from an ideal arrangement.

    The problem of 'serviceability' is fairly recent. Can the borrowing entity make the requisite repayments is a question financiers need to consider under the responsible lending code or whatever.

    What's the expressed problem with lending to Trusts?

    Not much help, I know, but perhaps a starting point and consider a broker.

    There are a few on the PT Forum.


    • #3
      Whoops, the trusts have a corporate trustee too.

      The trusts can service the debt. ASB said that it gets tighter if the interest rate was 6%. The main problem both banks have mentioned is my wife’s lack of income. They take into account half of the cost of our personal mortgage, even though she doesn’t pay it.

      We can hit a broker up, I was just hoping there might be a bank that deals with investors more than others or people who might have worked through a similar situation.


      • #4
        Yes, a broker is a good idea. If the one you choose is not hopeful and does not mention second tier lenders try another. Recommend iLender and had recent experience with them.