Some of our clients have been with us for years, and this post is about one of them.
He’s self-employed and runs a really good business that earns well. A while back, he decided he didn’t want so much of his wealth sitting in his personal name. That’s a common worry for business owners. He spoke to his own accountant, took their advice, and bought two residential properties through a company. We arranged the finance for both.
This year he wanted to borrow a bit more to do some work on those properties. On paper it should have been simple. Equity wasn’t an issue, and neither was serviceability. The problem was that the lender we’d used for his company loans last year doesn’t do company home loans anymore.
What changed with company and trust lending
Over the last 12 months, a lot of mainstream lenders have stepped back from lending to companies and trusts for residential property. Some have left the space completely. Others will still do it, but only for existing customers who already bank with them.
We don’t know yet whether this is permanent. Part of the reason it happened is that company and trust home loans got a lot of attention online. Some of the content out there pitched these structures as a way to get around borrowing capacity limits. The idea was that if each new property sits in its own company or trust, every loan can be assessed on its own and the rest of your debt doesn’t count.
Lenders noticed, and many of them pulled back.
Why we don’t lend that way
Setting up a new company or trust doesn’t change how much money comes into your household or how much goes out. Each repayment still has to come from somewhere. If you’re self-employed, it comes from you, your business, or both.
You might get a loan approved by ring-fencing it inside a new entity and leaving your other debts out of the picture. That doesn’t mean you can afford it. Approval and affordability are two different things.
Rates have been higher for longer than many people expected, and they could still go higher. It worries me when I hear of borrowers being set up with structures where nobody has looked at the full picture. If something shifts, the people who end up in financial hardship aren’t the ones who designed the structure. They’re the clients.
So we look at everything. Sometimes that means telling a client to bring their purchase price down, or saying “not right now”. Nobody loves hearing that, and I understand some people will want to push harder. We’d still rather have that conversation now than watch someone struggle with repayments later.
Back to our client
With this client, the full picture was strong. His business earns well, his existing loans are well looked after, and the borrowing he wanted made sense. He just needed a new lender who would take him on.
Most of the lenders we would usually go to for this are now out of the market. Among the ones still doing it, the best fit only offers company home loans to its existing customers, and our client wasn’t one.
Reading the policy and saying “they won’t do it” would have been easy. I didn’t think that was the right answer, so I asked for an exception.
How we asked for the exception
I wrote to the lender and told them about the client: who he is, what his business does, how he’s managed his lending over the years, and why the loan stacks up. I was upfront that I knew he wasn’t one of their customers and that their policy usually requires that. Then I explained why I thought they should make him one.
They approved the exception and said they’d be glad to take him on.
There’s a lot of maths behind any application, and the numbers have to work. But the numbers are only part of it. Most of the work is in how you present a client to the bank. That means knowing the lender, knowing what’s reasonable to ask for, and explaining the client’s situation clearly enough that the assessor can see what we see.
That doesn’t mean asking for something outlandish or bending the rules. We push when it makes sense and the client is genuinely strong. When it doesn’t make sense, we say so.
Strong relationships, strong applications
This isn’t about some brokers getting special treatment. It comes down to the relationships we’ve built with our lenders over time and the effort we put into every application. If a lender knows our files are well prepared, honest and complete, they’re more willing to hear us out when we ask for something outside the usual policy.
That takes time to learn and a lot of practice. I’ve been doing this for a long time, and so has the rest of our team. It’s one of the parts of the job I care most about, because a well-told story can change a “no” into a yes.
If you own property through a company or trust
If you hold property in a company or trust, or you’re thinking about it, a few things are worth knowing:
Your current lender may have changed its policy since you settled. That probably won’t affect your existing loan, but it could matter when you want to borrow more, restructure or refinance.
Structure decisions belong with your accountant and legal adviser. We’ll work with them to make sure the lending fits the structure they recommend.
Fewer lenders are doing this kind of lending now, and the ones that are often have tighter criteria. A well-prepared application matters more than ever.
If you’re self-employed and want to talk through your options, you can read more about our self-employed home loans, investment loans and refinancing. You might also like our post on how self-employed borrowers can prove their income in more than one way.
When you’re ready, make an appointment with us. We’ll look at your whole picture and give you an honest view of what’s possible, even if that view is “not yet”.
This article is general information only and doesn’t take into account your personal objectives, financial situation or needs. Lender policies change regularly. Please speak with your accountant or legal adviser about structuring, and with us about lending options that suit your circumstances.
