How to create a Division 7A loan agreement for a secured loan that allows for a term of 25 years

Question

How to create a Division 7A loan agreement for a secured loan that allows for a term of 25 years 

Answer

Under the relevant legislative rules, the maximum term for a secured loan (Div 7A) is 25 years. The loan must be secured by a mortgage over real property, noting:

  • the whole of the loan must be secured by a registered mortgage over the property; and
  • when the loan is first made, the market value of the property (less liabilities secured over the property in priority to the loan) must be at least 110% of the amount of the loan

The maximum term for any other loan (Div 7A) is 7 years.

As well as the 'Division 7A Loan' document form, you will also need to complete the 'Drawdown Acknowledgment for a Division 7A Loan'.

The Drawdown Acknowledgement includes an option for the loan to be secured or unsecured.

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Useful article from ATO: Division 7A loan

 

 

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