The Mortgage Borrowing Trap That Could Leave You Stuck

Property investors are constantly looking for ways to grow their portfolios, improve borrowing capacity and structure their investments more effectively.

But what happens when a strategy designed to help you borrow more ends up leaving you with more debt than you can comfortably manage — and fewer lenders willing to refinance you?

In this special episode of SugarMamma’s Fireplay, I sit down with mortgage broker Adam McCabe from Long Game Financial to unpack a lending strategy he has been increasingly concerned about.

It involves purchasing and borrowing through separate trust structures — an approach that, depending on the structure and lender assessment, may affect how existing debts are treated when applying for further finance.

On paper, this can potentially allow an investor to continue expanding their property portfolio.

But Adam explains why this can become problematic when the structure starts driving the borrowing decision rather than the borrower’s genuine ability to comfortably service and manage the debt.

And there is another important risk: lending policies can change.

As lenders reassess these structures and their exposure to them, some may tighten their policies or stop offering particular types of finance altogether. That can potentially leave borrowers with a much smaller pool of lenders available when they eventually need to refinance, restructure or obtain their next loan.

Should you wish to speak with Adam, you can contact him directly on 0423 685 133 or Adam.McCabe@bluelantern.com.au 

In this episode, Adam explains:

• How borrowing through individual trusts can work

• Why some investors have been encouraged to use this strategy

• How it may increase apparent borrowing capacity

• Why borrowing capacity and affordability are two very different things

• The danger of accumulating more debt than your household can realistically support

• Why lender policy changes matter

• How a shrinking pool of lenders can affect your ability to refinance

• The importance of considering your exit strategy before taking out the loan

• Why good mortgage advice should consider your long-term financial position — not simply how much money you can borrow today

The key takeaway

Just because a lending structure may allow you to borrow more doesn't necessarily mean you should.

Debt needs to work within your broader financial life — your income, cash flow, buffers, goals and ability to withstand changing interest rates and circumstances.

And when you're considering a more complicated lending or ownership structure, make sure you understand not only how you get into it, but how you eventually get out of it.

Because the best loan isn't necessarily the one that allows you to borrow the most.

It's the one that still works for you when life — and lending policies — change.

Important: Trust structures can have significant lending, legal and taxation implications. This episode is general information only and isn't personal financial, credit, legal or tax advice. Seek appropriately qualified professional advice before establishing a trust or entering into a lending arrangement.

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While we discuss financial topics, everything shared here is general information only — never personal, product, or investment advice. Always:

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Canna Campbell is an Authorised Representative and Financial Adviser of Links Licensee Services Pty Ltd (AFSL No. 700012 | ABN 97 678 975 589).