How to Secure Property Loans Through a Family Discretionary Trust

A step-by-step guide to setting up your trust and securing finance for your next property purchase.

Introduction

In recent years, we’ve noticed a strong shift: more and more Australians are using trust structures—particularly family trusts and discretionary trusts—to purchase investment properties. Despite this trend, a lot of property investors still feel unsure about how to set up a trust correctly, how to apply for a home loan under a trust, and what the banks require. 

Borrowing through a trust isn’t just a matter of ticking a few boxes — it takes the right guidance, some thoughtful preparation, and an understanding of how trust structures, loan documentation, and lender requirements come together. Whether you’re an experienced investor or buying your first property inside a trust, getting familiar with the process can save you significant time, money, and stress.

In this article, we’ll break down the entire process—from setting up a trust to applying for a property loan—so you can navigate it confidently.

What is a Trust, and How Long Does It Usually Take to Establish a Trust Structure?

In simple terms, a trust is a legal arrangement where a trustee holds assets (such as a property) for the benefit of others, known as beneficiaries​. Trusts are commonly used for investment purposes, operating businesses, asset protection, and estate planning.

There are different types of trusts, but for property loans, family trusts (discretionary trusts) and unit trusts (fixed trusts) are the most common. Discretionary trusts allow the trustee flexibility in distributing income among beneficiaries, while unit trusts allocate income based on pre-set percentages​. 

How long does it take to set up a trust?

• Generally, setting up a basic family or discretionary trust can be done within a week or two.
• If your state requires the trust deed to be stamped (like NSW or VIC), allow additional time for the stamping process.
• You’ll also need to apply for an ABN and TFN for the trust if you intend to open a bank account or lodge tax returns.
• Once the trust deed is executed, ABN and TFN registrations usually take about 1–2 weeks depending on the ATO’s processing time.

Key Things You Need to Know Before Applying for a Loan in a Trust Structure

1. Banks Prefer Specific Types of Trusts

Not every trust is treated equally when it comes to borrowing. Most lenders are happy to work with Family Trusts (also known as Discretionary Trusts) and Unit Trusts (Fixed Trusts), as these structures are familiar and straightforward from a lending perspective. However, some banks are hesitant—or even outright refuse—to lend to Hybrid Trusts or Self-Managed Super Funds (SMSFs) for residential property purchases, unless very specific conditions are met.

2. Documentation You Will Need

When applying for a loan through a trust, lenders will need to see clear evidence that the trust is properly set up and legally capable of borrowing. Having the right documents ready from the start will make the application process much smoother and faster. Generally, you’ll be asked to provide:

• A certified copy of the Trust Deed.
• Identification for all Trustees, Directors (if corporate trustee), and Beneficiaries.
• Financial statements and tax returns (where applicable).
• ABN and TFN confirmation.
• Evidence of income and liabilities for Trustees and Guarantors​

3. Who Must Be a Party to the Loan?

Banks generally require all controllers and beneficial owners to be parties to the loan.
This usually includes:

• Individual Trustees
• Directors and Shareholders of Corporate Trustees and 
• Beneficial owners 

If you’re using a corporate trustee, all directors and shareholders must generally act as guarantors, with no third-party shareholders allowed​. 

4. Loan Structure

When borrowing through a trust, it’s important to understand how lenders set up the loan arrangement. Banks generally structure the loan so that both the trustee and the trust are formally involved, providing them with legal protection and ensuring all parties are properly tied to the loan. Typically, the structure looks like this: 

• The Trustee (individual or corporate) as the borrower.
• The Trust (family trust or unit trust) as the mortgagor.

For example, if your corporate trustee is ABC Pty Ltd and your trust is called XYZ Trust, the borrower would be recorded as ABC Pty Ltd as Trustee for XYZ Trust (often abbreviated to ABC Pty Ltd ATF XYZ Trust).

As mentioned above, if the trustee is a company, the directors of the company are usually required to provide personal guarantees for the loan. If the trustee is an individual, that person will personally guarantee the loan.

Common Challenges When Borrowing Through a Trust

Incorrect Documentation – One of the key hurdles is ensuring that your trust documentation is in order. The trust deed must explicitly allow the trustee to borrow funds and mortgage trust assets. It also needs to be properly executed. In states where stamp duty applies to trust deeds, lenders will typically require a stamped copy before progressing with the loan application. Any errors or omissions in this process can delay or derail your finance approval.

Guarantor Requirements – Some lenders have strict policies requiring all adult beneficiaries of the trust to act as guarantors. If any adult refuses to sign—or if the trust includes foreign beneficiaries—it can significantly complicate the loan process or even result in outright rejection. It’s important to structure your trust carefully and work with a lender who understands the nuances of trust lending.

Credit Report Checks – Lenders will thoroughly assess the credit histories of all relevant parties. This includes individual trustees, directors of corporate trustees, and sometimes even the beneficiaries. In addition, trustee companies—and occasionally the trust itself—may have separate credit files that lenders will review. Any adverse listings can impact your ability to secure finance, so it’s vital to ensure all involved entities have clean credit histories.

How to Improve Your Chances of Getting a Loan Approved Through a Trust

While borrowing through a trust comes with its own set of challenges, being well-prepared can make a significant difference in your chances of getting approved. Lenders feel more confident when the structure is clear, the paperwork is accurate, and all parties involved meet their requirements. 

Here are some practical steps you can take to strengthen your application:

• Engage a mortgage broker who understands the nuances of trust lending and has experience securing loans through trust structures.
• Use an experienced property accountant like Investax to create your trust structure correctly from the start, ensuring it’s suitable for lending and compliant with legal and tax requirements.
• Prepare all documentation in advance, including a clear certified Trust Deed.
• Use a clean, simple trust structure (no third-party appointors or shareholders).
• Have Trustees and adult beneficiaries ready to act as guarantors if needed.
• Ensure the trustee company (if any) has no adverse credit issues.

Conclusion: Ready to Take the Next Step?

Borrowing through a trust doesn’t have to be a nightmare—but it often becomes one when key things are overlooked. Missing documentation, poorly structured trusts, or working with an inexperienced mortgage broker or lender can quickly derail the process.

That’s why it’s critical to have the right team behind you. With an experienced property accountant like Investax guiding your trust setup, and a trusted mortgage broker who understands how to finance within that structure, your path to property ownership becomes much smoother.

If you’re considering buying property through a family or discretionary trust and want expert support in setting it up—or navigating the lending process—Investax Group is here to help.

We offer a 15-minute free consultation to discuss your tax, property investment and business needs. Book your complimentary consultation now.

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