Family trusts own a significant proportion of New Zealand’s residential property, particularly among older homeowners and high-wealth families. Mortgaging a property held in a family trust is possible — but it involves additional legal requirements, personal guarantees, and lender scrutiny that don’t apply to individual borrowers.
You can get a mortgage in a family trust in NZ, but the trust's trustee(s) must apply as borrowers and provide personal guarantees. Lenders will assess the trustees' personal income and creditworthiness, not just the trust's assets. The trust deed must allow borrowing and must be reviewed by the bank's solicitors.
Why Properties Are Held in Family Trusts
New Zealanders have historically used family trusts to:
- Asset protection: Separating personal assets from business liability risk
- Estate planning: Controlling the distribution of assets across generations
- Residential care subsidy: Historically used to reduce assessable assets for rest home subsidy (the rules have tightened significantly since 2020)
- Relationship property: Removing assets from the pool of relationship property
Note: The asset protection benefits of trusts are more limited than they were pre-2020 following legislative and case law developments. Anyone considering establishing a trust should get current legal advice.
How a Trust Mortgage Works
A trust does not have its own income or creditworthiness in the way a person does. When a family trust borrows:
- The trustees are the borrowers — they sign the mortgage in their capacity as trustees
- Personal guarantees are required — lenders almost always require the trustees (and often the beneficiaries who benefit from the property) to sign as personal guarantors
- The trust deed is reviewed — lenders require the trust deed to be reviewed by their solicitors to confirm the trust has the power to borrow and that the borrowing is consistent with its purposes
- Beneficiary consent — some lenders require consent from adult beneficiaries of the trust
Lender Requirements for Trust Mortgages
| Requirement | Detail |
|---|---|
| Trust deed | Must be provided — lender’s solicitor will review |
| Borrowing power | Trust deed must explicitly allow the trust to borrow |
| Trustee identity | Full KYC (Know Your Customer) documentation for all trustees |
| Personal income assessment | Trustees’ personal incomes are assessed for serviceability |
| Personal guarantees | Almost always required from all trustees |
| Additional guarantors | Beneficiaries may also be asked to guarantee |
| DTI assessment | Based on trustees’ personal DTI (their personal debts + trust debt vs their personal income) |
Serviceability: Whose Income Counts?
The trust has no income of its own in most cases — it passes income to beneficiaries (or retains it). Lenders assess the trustees’ personal income to determine serviceability.
If you are a trustee and the property is your family home, your income and DTI are assessed. Your existing personal debts plus the proposed trust mortgage cannot exceed 6× your personal gross income.
If the property is income-producing (rental property in a trust), the rental income may count toward serviceability, subject to the standard 75% shading applied to rental income.
The Trust Deed Must Allow Borrowing
Not all trust deeds explicitly allow the trust to borrow money. A well-drafted modern trust deed will include a power to borrow, offer security, and incur debt. Older or poorly drafted trust deeds may not — requiring a deed of variation before the bank will proceed.
Deed of variation: A formal amendment to the trust deed, usually drafted by a solicitor ($500–$1,500). Requires the consent of all trustees and sometimes beneficiaries.
LVR Rules and Trusts
LVR restrictions apply the same way for trust-owned properties as for individually owned properties:
- Owner-occupied residential: 20% deposit (80% LVR) for standard lending
- Investment property: 35% deposit (65% LVR)
- First Home Loan (5% deposit): Not available for property held in a trust — First Home Loan requires the borrower to be an individual first home buyer, not a trust
Can a Trust Buy a New Property (First Purchase)?
Yes — if the trust has sufficient assets or the trustees have sufficient income to service the debt. The trust buys as a standard purchaser at auction or by negotiation. The mortgage application goes in the trust’s name (trustees acting), with personal guarantees.
If any trustee is a first home buyer personally (who has never owned property), they cannot access the First Home Loan through a trust purchase — they would need to buy in their personal name to access that scheme.
Costs of Trust Mortgages
Trust mortgages typically cost more than individual mortgages because of additional legal work:
- Bank solicitor review of trust deed: $500–$1,200 (passed to borrower)
- Deed of variation (if needed): $500–$1,500
- Trust conveyancing: Same as standard conveyancing ($1,200–$2,500) plus any extra trust-specific legal work
When to Review Whether Your Trust Still Makes Sense
Family trusts established more than 15 years ago should be reviewed by a trust/estate lawyer, because:
- Rest home subsidy rules changed in 2020 — trusts are generally no longer effective for this purpose
- Compliance costs (annual accounts, trust reviews, deed amendments) often outweigh benefits for modest trusts
- The Tax Administration Act 2018 and Trusts Act 2019 increased compliance obligations significantly
Many families are winding up trusts that are no longer serving a clear purpose.
Frequently Asked Questions
Can a family trust get a mortgage in NZ?
Yes — the trustees apply as the borrowers on behalf of the trust and typically provide personal guarantees. The trust deed must permit borrowing and is reviewed by the bank’s solicitors.
Do I need a personal guarantee for a trust mortgage in NZ?
Almost always yes — banks in NZ require personal guarantees from trustees (and sometimes adult beneficiaries) for trust mortgages. This means you are personally liable for the trust’s mortgage debt if the trust cannot repay.
Can I use a First Home Loan to buy into a trust in NZ?
No — the Kāinga Ora First Home Loan requires the borrower to be an individual, not a trust. If you want to use a 5% deposit First Home Loan, you must buy in your personal name.
Does a trust need to show income to get a mortgage?
The trust itself doesn’t need income — but the trustees’ personal incomes are assessed for serviceability. If the property is a rental within the trust, the rental income may also count toward serviceability.
How does DTI work for a trust mortgage?
The DTI is assessed on the trustees personally — their personal debts plus the proposed trust mortgage, divided by their personal gross income. The limit is 6× for owner-occupied and 7× for investment.