Can a Family Trust Get a Mortgage?

Who actually borrows

A trust isn't a legal person. It can't sign a loan. The trustees borrow on its behalf, and the property is registered in their names as trustees. So when people say "the trust has a mortgage", what's meant is that the trustees have borrowed and given a mortgage over a property they hold on trust.

How lenders assess it

A family trust usually has no income of its own. The lender therefore looks through the trust to the people who'll make the repayments, typically the settlors, who are often also trustees and beneficiaries.

• Their income, spending and credit history are assessed exactly as for a personal loan.
• They sign personal guarantees for the trust's debt. This is close to universal.
• Deposit and loan-to-value rules apply as they would to those people buying in their own names, depending on whether they'll live in the home or rent it out.

The personal guarantee is the part people overlook. Many set up a trust partly to separate assets from personal risk. A guarantee means you remain personally liable for the mortgage. The trust may still serve its other purposes, but it doesn't put the home loan at arm's length.

Documents a lender asks for

• The trust deed and every variation, plus any deeds appointing or removing trustees.
• Identification for all trustees, and often for settlors and beneficiaries, under anti-money-laundering rules.
• A trustee resolution approving the borrowing.
• A solicitor's certificate confirming the trustees have power to borrow and give the mortgage.
• Certificates of independent legal advice for guarantors, and for independent trustees.

Lenders read the deed to check the trustees are allowed to borrow and mortgage trust property. Very old deeds sometimes need a variation first.

Independent and professional trustees

If your lawyer or accountant is a trustee, they'll want their liability limited to the trust's assets, and lenders generally accept that. It means more signatures and a little more time. Corporate trustee companies are handled in a similar way, with the directors providing guarantees.

What a trust costs you in lending terms

• Higher legal fees. More documents, more advice, more certificates.
• Slower. Allow extra time for the deed review and independent advice.
• Fewer lenders. Most banks lend to standard family trusts. Unusual structures narrow the list.
• First home schemes. Kāinga Ora's First Home Loan is for people buying in their own names. KiwiSaver first-home withdrawals have their own ownership rules, so check with your provider before planning to buy through a trust.

Moving an existing home into a trust

If the home has a mortgage, you need the lender's consent before transferring it. The lender will document the loan again with the trustees as borrowers and you as guarantors. Your lawyer handles the transfer. Raise it with the lender early, because moving the property without consent can breach your loan terms.

This article explains how New Zealand lenders generally assess these situations. It is general information, not personalised financial advice, and lender policy changes often — check your own position with a registered adviser. Official sources: Reserve Bank of New Zealand for lending policy and the OCR, and Sorted.org.nz for independent government-backed money guidance.