Loan Structuring for Home Loans: Broker Guide

What Loan Structuring Means

A loan structure sets the purpose of each borrowing, the property securing it and the people responsible for repayment. Brokers also call this home loan structure or deal structuring.

Record the use of the borrowed money and which property secures it. Identify the property owners separately from the borrowers responsible for the debt.

Those answers can differ. A client can borrow against their home to fund an investment deposit, or use rental property security to fund private spending.

The Australian Taxation Office’s rental interest guidance connects interest deductions to income-producing use of the borrowed money. Rental security alone doesn’t make private borrowing deductible.

Structure also affects flexibility and future borrowing. A fixed split can restrict extra repayments, while shared security adds lender requirements when a client sells one property. The amount of debt and the repayment terms feed into the next lender’s serviceability assessment, which tests the client’s ability to repay.

Structure Choices Brokers Make

Choose each loan component for a specific client need and record how it works with the others.

Splits and Loan Purpose

Use separate loan accounts for distinct purposes, especially private and investment spending. A split can also separate fixed and variable rates, but purpose and rate type are different decisions. The split home loan guide covers that rate choice.

For investment loan structuring, keep the existing home debt separate from new borrowing used for an investment deposit. Pay the investment funds through a traceable path to the purchase and retain the settlement records.

Correct case: a dedicated investment split pays only the rental property’s deposit and purchase costs. Its statements identify interest separately from the existing private home loan.

Incorrect case: the client adds investment borrowing to the private home loan, then claims interest on the whole account. Mixed-purpose debt requires apportionment, and renaming a split doesn’t change how earlier borrowed money was spent.

The client’s registered tax agent must settle the tax treatment and any proposed debt recycling strategy before funds move. Separating accounts supports the records without creating a deduction by itself.

Offset Accounts and Access to Cash

An offset is a separate account whose balance reduces the linked loan balance used to calculate interest. Choose which split it offsets and how much cash the client expects to keep there.

Redraw lets the client borrow back extra repayments, subject to the loan’s terms. A private redraw from investment debt can create a private-use portion. Keep the purpose of each withdrawal in the records.

Compare offset fees with the expected interest saving. A client holding a small cash balance can pay for a feature they rarely use. Fixed-rate offset access also depends on the product, as the lender examples below show.

Packages and the Features the Client Uses

A package mortgage bundles a home loan with other products for a package fee. Bank of Melbourne’s package offers eligible credit cards as optional additions. Compare the annual fee with the interest and fee savings the client will actually receive.

A mortgage with a credit card package adds another limit to the scenario if the client takes the card. Include that limit in the liabilities sent for assessment. Choose the package only when its useful benefits justify the total cost.

Repayment Type

Principal-and-interest repayments reduce the loan balance. Interest-only repayments leave the principal outstanding during the interest-only period, so the client needs a reason for choosing them and a repayment plan afterwards.

Moneysmart explains that repayments increase when the interest-only period ends. Model that later repayment alongside the client’s other debts. An interest-only investment home loan needs assessment beyond its lower initial payment.

If the client describes a ballooning mortgage, establish whether they mean rising repayments or a final lump-sum payment. Model the relevant payment and how the client plans to meet it.

Security and Ownership

Standalone security keeps each property allocated to its own borrowing arrangement. Shared security uses more than one property to support debt, which can make a later sale or refinance depend on the remaining security position.

Separate account numbers don’t prove the properties are separately secured. Read the proposed mortgage and loan terms, including any clauses securing other debts. The cross-collateralisation guide explains shared security and release issues.

Record the borrowers and property owners separately. Joint borrowers, a sole owner or a trustee arrangement change the documents and lender rules you need to assess. Coordinate the ownership decision with the client’s legal and tax advisers before choosing the borrowing arrangement.

Porting a Mortgage When the Client Moves

A portable mortgage can let the client retain a loan while replacing its security property. CommBank’s security-substitution guide requires acceptable replacement security and allows further credit assessment. Borrowing more or changing ownership can require a new application.

Record the sale and purchase timing, replacement property’s value and any change in borrowers. Compare the lender’s substitution costs and conditions with refinancing before relying on portability in the client’s moving plan.

Write the Client Scenario

Write loan scenarios as a funding plan with enough financial detail for a lender to assess both the borrowers and the structure.

Gather these inputs before sending a scenario to a business development manager (BDM) or policy tool:

• The purpose and amount of each split, including deposit funding and purchase costs.
• Each borrower’s income source, employment history and supporting documents, plus expected rent.
• Living expenses, dependants and all liabilities, including credit limits and existing loan terms.
• The deposit source, available cash and cash the client wants to retain.
• Each security property’s value, type, location and registered owners.
• The loan-to-value ratio (LVR), calculated as debt divided by the relevant security value.
• Required offsets, rate types, repayment types and proposed loan terms.
• The finance deadline, settlement timing and any planned sale or change in property use.

For newlywed couples, record both partners’ existing debts, contributions and plans for changes in income. Test the proposed repayments against those plans before choosing joint borrowing or a particular split arrangement.

Professional mortgage advice addresses the borrowing structure and lender fit. Keep financial planning, ownership advice and tax decisions with the relevant advisers, and give them the same funding plan.

A Worked Mortgage Scenario

In this hypothetical case, a couple jointly own a home worth $1,000,000 with $400,000 owing. They want a $600,000 rental property and have $50,000 cash they want to retain.

They propose a separate $150,000 investment-purpose split against the home. It funds the $120,000 purchase deposit and an assumed $30,000 of purchase costs. A separate $480,000 loan secured by the rental property funds the remaining purchase price.

The home would secure $550,000 in total, giving a 55% LVR. The rental property’s $480,000 loan gives an 80% LVR. Total debt would be $1,030,000, including the deposit borrowing.

The $30,000 cost allowance is illustrative. Replace it with the client’s actual transfer duty, conveyancing and other purchase costs before assessing the funding position.

A broker could put the scenario to a lender in these words:

Two joint borrowers have combined gross salary income of $220,000 a year and no dependants. Their declared living expenses are $5,000 a month. They have a $10,000 credit card limit and no other debts beyond the home loan.

They want to retain the $400,000 owner-occupied loan and add a separate $150,000 investment-purpose split against their $1,000,000 home. The investment split funds the deposit and assumed purchase costs for a $600,000 rental property.

A $480,000 investment loan would be secured only by the rental property. Expected rent is $600 a week, subject to the rental appraisal. They want principal-and-interest repayments over 30 years on the proposed loans, subject to assessment.

Keep the properties separately secured and keep their $50,000 savings in an offset against the owner-occupied debt. Settlement is in six weeks. Can you support this security arrangement and assess the full $1,030,000 debt, including the borrowed deposit?

Attach income evidence, existing loan statements, the expense breakdown and rental appraisal. The lender must assess the proposed term and repayments on each account. The purchase loan’s 80% LVR doesn’t remove the need to service the separate deposit loan.

Test Structures Against Lender Policy

Test the whole structure against each lender’s rules, because an acceptable borrower can still need a feature the lender’s product doesn’t support.

For example, consider a client who wants a fixed-rate investment loan with $15,000 held in an offset. Macquarie’s product guide limits linked offsets to variable-rate accounts. That proposed fixed account fails its offset requirement.

Bank Australia’s Offset Home Loan permits an offset on fixed-rate loans, capped at $20,000 with one linked account. The $15,000 requirement fits that feature rule.

It doesn’t establish approval of the borrower’s income, security or overall application.

Split counts matter too. Macquarie’s guide allows up to six loan accounts during application. Its Offset Home Loan Facility permits further accounts after settlement, so a requirement for seven accounts at settlement needs a different proposal.

CommBank’s broker switching and splitting policy distinguishes permitted switches from changes requiring a new application. Changing borrowers or extending the loan amount or term falls outside its switching process. Requesting a switch from principal-and-interest to interest-only requires a serviceability assessment.

Compare the Same Facts Across Lenders

Keep the scenario inputs constant while comparing lenders. Record whether each supports the proposed loan purposes, security allocation, repayment terms and required account features. Then compare serviceability using each lender’s treatment of income and existing debts.

Bulma lets you describe the structure once. Its Scenario Planner checks the scenario across 52+ lenders and groups them into standard-policy fits, conditional fits and cases needing an exception. It returns borrowing power, required documents and conditions, with the policy wording behind its answers.

If you change the deposit borrowing or repayment type, rerun the whole scenario. Otherwise the shortlist can reflect one structure while the funding plan describes another.

Before recommending, reconcile the result with the lender’s product terms, valuations and assessment. Compare total costs and document why the required features benefit this client. ASIC’s mortgage broker best interests duty guidance explains the obligation governing the recommendation.

Complex and Outside-Policy Structures

A structure needs an exception when a required element falls outside the chosen lender’s standard rules. A specialist lender becomes relevant when its standard offering accommodates that element.

Borrowing through a trust, using unusual security or requesting a repayment arrangement outside standard terms can narrow the lender list. These features don’t automatically require specialist lending. Identify the particular rule the proposed structure fails before seeking an exception.

Gather evidence that answers the objection. A security issue needs property and valuation detail, while an income issue needs proof of the income and its continuity.

A trust structure needs the deed and trustee details. An interest-only request needs its purpose and repayment exit.

Send the BDM the exact departure, proposed structure and evidence addressing it. Ask whether the lender can consider it and who must authorise the exception. Keep the written response and its conditions with the file.

An exception discussion leaves the lender’s credit assessment outstanding. Change the structure and reassess if the lender requires a lower borrowing amount, different security or a different repayment type.

Once the structure works, compare mortgage lenders in Australia on cost, policy fit and the features the client will use. Keep the final recommendation tied to the same split amounts and security arrangement that the lender assessed.