{"id":19970,"date":"2018-01-16T01:00:49","date_gmt":"2018-01-15T14:00:49","guid":{"rendered":"https:\/\/www.realestatetalk.com.au\/?p=19970"},"modified":"2018-01-16T01:00:49","modified_gmt":"2018-01-15T14:00:49","slug":"lvrs-are-on-the-move-andrew-mirams","status":"publish","type":"post","link":"https:\/\/channels.realty.com.au\/realtytalk\/lvrs-are-on-the-move-andrew-mirams\/","title":{"rendered":"LVR\u2019s are on the move \u2013 Andrew Mirams"},"content":{"rendered":"<p>Bare Trusts are quite common but they still need to be set up correctly.\u00a0 <strong>Andrew Mirams<\/strong> fills in the gaps and talks about how the banks look at them.\u00a0 He also outlines the changes in loan to value ratios.<br \/>\n<strong>Transcript:<\/strong><br \/>\n<strong>Kevin:\u00a0<\/strong>\u00a0What\u2019s changed? How has the lending environment changed? Particularly, let\u2019s have a look at self-managed superannuation funds, loan-to-value ratios, what\u2019s happening, and how the banks are feeling about that. To bring us up to date on that, Andrew Mirams from Intuitive Finance.<br \/>\nGood day, Andrew. Welcome back into the show. Happy New Year to you, too, mate!<br \/>\n<strong>Andrew<\/strong>: \u00a0Good day, Kevin. Happy New Year to you. Thank you very much. Happy New Year to all the listeners out there.<br \/>\n<strong>Kevin:<\/strong>\u00a0 I did have a question on this point. Firstly, the question relates to a bare trust. Can you tell me what a bare trust is?<br \/>\n<strong>Andrew:<\/strong>\u00a0 There have been a lot of uses for them, but now they basically work in conjunction with a self-managed super fund. A self-managed super fund is what we call a limited resource borrowing arrangement. What that means is that if a property is purchased in your super fund, it needs to have an independent owner, and that\u2019s what the bare trust is.<br \/>\nIf you bought a property for $200,000 and had a loan for $160,000, let\u2019s say, and for some reason, you had to sell the property for $100,000 \u2013 the property had crashed \u2013 and there was a deficit, the banks can\u2019t go after the balance of the superannuation fund because that\u2019s the limited resource borrowing. It\u2019s just solely against that property and against that. So, the bare trust actually insulates or isolates the balance of the superannuation fund from the property and the actual borrowing.<br \/>\n<strong>Kevin:<\/strong>\u00a0 Given that it\u2019s protecting the value of that property, is it possible to have more than one property in a bare trust?<br \/>\n<strong>Andrew:<\/strong>\u00a0 No. You can have numerous properties in a self-managed super fund, but one bare trust owns each property because each one is individually isolated from the other transactions.<br \/>\n<strong>Kevin:<\/strong>\u00a0 Yes, that answers my next question. You can have multiple properties in a self-managed super fund but each one has to have its own trust.<br \/>\n<strong>Andrew:<\/strong>\u00a0 Its own bare trust, because it\u2019s the bare trust that actually secures that limited resource borrowing arrangement.<br \/>\n<strong>Kevin:<\/strong>\u00a0Okay. How difficult is a bare trust to set up?<br \/>\n<strong>Andrew:<\/strong>\u00a0 It\u2019s pretty simple. It becomes part of it when you set up your self-managed super fund. Your financial planners, accountants, solicitors can set them up with minimum of fuss. It\u2019s quite easy to do.<br \/>\n<strong>Kevin:<\/strong>\u00a0 How do the banks look at the lending in a bare trust like that?<br \/>\n<strong>Andrew:<\/strong>\u00a0 It\u2019s still they\u2019re lending to the super fund; the bare trust is just the beneficial owner of it. The bare trust is a trustee for the super fund. So, that bare trust still owns the property on behalf of the superfund.<br \/>\n<strong>Kevin:<\/strong>\u00a0 What\u2019s happening with loan-to-value ratios? How much money do you need to set one of these up?<br \/>\n<strong>Andrew:<\/strong>\u00a0 With self-managed super funds, we\u2019ve seen over the course of the last year the LVRs reduce. The majority\u2026 I think everyone now is 70% loan-to-value ratio, down from 80% in times past. There\u2019s also another little factor with that. The super funds must now also be able to prove a 10% liquidity over and above that. So, you\u2019re almost now talking about a 60% loan-to-value ratio.<br \/>\nAs with all the investor rates and things like that, there\u2019s now a premium if you want interest-only, so generally your principal-and-interest rates will be cheaper. They don\u2019t really define on the loan-to-value ratios, but 70% is about the rule of thumb nowadays, Kevin.<br \/>\n<strong>Kevin:<\/strong>\u00a0Is that worsening over time? Is there a requirement for you to put more money into these bare trusts?<br \/>\n<strong>Andrew:<\/strong>\u00a0 I think probably we\u2019ve had some buoyant markets. I think we\u2019ve seen the banks and the regulators want to just restrict and make sure you don\u2019t over because of the limited resource, so they can only actually ever go back after that; probably they can\u2019t pursue the balance of the fund or the directors.<br \/>\nSo, I think what we\u2019ve seen is in the heady times, we were doing 80% loan-to-value ratios. It\u2019s now restricted just to protect probably the lenders and also the funds to make sure they\u2019re not over-committing themselves to get into the market.<br \/>\n<strong>Kevin:\u00a0\u00a0<\/strong>That 70% LVR, is that the lowest it\u2019s been, or have there been lower?<br \/>\n<strong>Andrew:<\/strong>\u00a0 There are a couple lenders that are at 60%, but most lenders will still do 70% now. That\u2019s come off. The 80% was the maximum we were able to do, so that\u2019s come down from there. That\u2019s about where it sits at the minute now \u2013 60% to 70% \u2013 plus normally that 10% liquidity requirement as well.<br \/>\n<strong>Kevin:<\/strong>\u00a0 As always, we\u2019ll just round this chat out, to make sure you get some independent legal advice and also independent financial advice for your own situation, you could do certainly no better than going to Andrew Mirams and the team at Intuitive Finance. You can contact them on any one of the buttons on Real Estate Talk.<br \/>\nThanks for your time, Andrew. We\u2019ll talk to you again soon.<br \/>\n<strong>Andrew:<\/strong>\u00a0 Pleasure, Kevin. All the best.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Bare Trusts are quite common but they still need to be set up correctly.\u00a0 Andrew Mirams fills in the gaps and talks about how the banks look at them.\u00a0 He also outlines the changes in loan to value ratios. Transcript: Kevin:\u00a0\u00a0What\u2019s changed? How has the&#8230;<\/p>\n","protected":false},"author":176692471,"featured_media":19971,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[32,34,10,11,13,25,27],"tags":[101],"class_list":["post-19970","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-buying-a-property-topic","category-finance-topic","category-kevin-turner-sponsored-channels","category-kevin-update","category-latest-story","category-sponsored-channels","category-trends-topic","tag-podcast"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v27.4 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>LVR\u2019s are on the move \u2013 Andrew Mirams - Realty Talk<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/channels.realty.com.au\/realtytalk\/lvrs-are-on-the-move-andrew-mirams\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"LVR\u2019s are on the move \u2013 Andrew Mirams - Realty Talk\" \/>\n<meta property=\"og:description\" content=\"Bare Trusts are quite common but they still need to be set up correctly.\u00a0 Andrew Mirams fills in the gaps and talks about how the banks look at them.\u00a0 He also outlines the changes in loan to value ratios. 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