Securing finance for Trust investment

Question from Rachel updated on 28th September 2015:

Our family trust has a freehold property, which is worth approximately $200,000 in Otago. We are now looking at investing in Christchurch.

As we are absolute beginners in this area,could you please advise on the process that we need to go through to secure finance for a deposit for an investment property in Christchurch from the freehold property that we currently have?




Our expert Kris Pedersen responded:

Your initial structure is great - with you having the equity in the home protected in the trust. I would recommend that you look to raise a 20% deposit against the equity inside the trust from one lender and then raise the other 80% to complete the purchase from a secondary bank so that the properties are not cross secured.

Take advice from an accountant on what you should be purchasing the new property into as they will probably advise that both the 20% and 80% be borrowed through this entity. (Note that the trust can continue to own the Otago property, but you are able to have a different entity used for the borrowing side which may be preferential depending on the tax advise you receive.)

In the future, you can look to top up against the Christchurch property in order to pay the deposit funds back to the trust. 

Kris Pedersen of Kris Pedersen Mortgages is a commentator on property and finance. His team sources top finance strategies.

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