Low doc loans
Do you qualify for a low doc loan?
Low Doc (Low Documentation or Lite Doc) Home Loans are aimed toward those who are Self Employed and are unable to prove their income – meaning you are unable to obtain recent tax returns or financial statements.
If you do fit into this category, then I’m sure that you have already found that choosing the right Low Doc Home Loan can be difficult as lenders have vastly different requirements & interest rates.
We have developed a low doc loan calculator that will help you to determine if you can qualify for a Low Doc Home Loan within minutes.
Alternatively, you can call us on 1300 889 743 or enquire online and one of our mortgage brokers will help you to go through the mortgages that you may qualify for.
Low doc mortgage basics
These days lenders are less inclined to approve low doc loans. In particular specific types of low doc loans such as a loan to refinance your existing lender or a mortgage without BAS statements to back up your declared income are difficult to obtain.
- What is a low doc loan?: Find out the basics of borrowing money without proving your income.
- No BAS low doc loans: Many lenders now require BAS statements to prove your income. However not every lender has this requirement! Find out which lenders can help.
- Home loans with no payslips: Many people have PAYG (pay as you go) jobs, yet cannot prove their income with payslips. There are alternatives to a standard loan that can allow you to borrow without evidence of your income.
- Low doc refinance: Are you stuck on a high rate low doc loan? Although many lenders will not approve refinance applications there are still some willing to consider these applications.
- Low doc calculator: Do you want to find out if you qualify for a low documentation home loan? This calculator will tell you!
How do lenders assess a low doc loan?
Every lender will assess a low doc loan differently; however there are some similarities between most financial institutions:
- Loan to Value Ratio (LVR): Most lenders will accept loans for up to 60% LVR, and some will consider up to 80% LVR with a low doc loan. The LVR of your mortgage is the percentage of the property value that you are borrowing.
- Length of ABN / GST registration: The majority of lenders require you to have an ABN that has been registered (and possibly GST registered) for two years. Some lenders can accept a new ABN if you have a low LVR.
- Reasonable income: Does the declared income make sense? For example an 18 year old apprentice would be declined if they declared an income of $200,000.
- Asset to income ratio: Lenders like to see that you have a net asset position that is equal to two times your annual gross income.
- Clean credit: Lenders look particularly closely at your credit file and the repayment history of your debts. The major banks are far less forgiving of any problems with your credit history.
- Security: Lenders prefer prime security properties in high demand locations. Properties that are unique, in disrepair or that are difficult to sell are not accepted.
- Exposure: Most lenders prefer low document borrowers with total debts under $1mil. A few select lenders allow loans of up to $2.5m per borrower group (e.g. a husband and wife’s total borrowings together) and one has no limit on the maximum loan size if you are borrowing less than 60% LVR.
- Cash out: Lenders normally require proof of how the loan funds will be used if any money is released directly to the borrower.
- Refinances: Some lenders will not refinance an existing low document home loan, however will allow you to purchase a property with a low doc loan.
Is there anything I should watch out for?
Low Doc loans are a higher risk to financial institutions; as such they do place higher restrictions on this type of loan, below is a list of possible catches to look out for:
- Higher interest rates – this will depend mainly on lender and as to what you can provide in the way of verification/supporting documentation. Some of our lenders have the same low rates as they do for full documentation home loans however.
- Higher deposit – 20% of the purchase price is normally what is required by the lenders.
- LMI – Mortgage Insurance is sometimes a compulsory requirement. LMI is applicable only if you borrow over 60% LVR (60% of the property value).
So you don’t get caught out by these potential restrictions, please speak to one of our specialist mortgage brokers by calling 1300 889 743 or enquiring online.
Do I need to prove my income?
Modern day low doc loans require you to provide supporting documents to back up the income that you put down on the lender’s income declaration form.
Each lender has their own requirements and will accept different document types to verify your income.
The main documents you can use to verify your income are:
- 12 months BAS statements showing a high turnover.
- An accountants letter verifying your income.
- Business bank statements showing a high turnover.
- Old tax returns (over 24 months) in combination with current financial statements.
- One of our lenders does not require income evidence for their low doc loans. Please call us on 1300 889 743 or enquire online for more information.
If you can’t provide these documents then it is unlikely that you can get approval for a low doc loan. All lenders require some form of verification as under the NCCP Act they are required to have some kind of income verification before they approve your mortgage.
Use our Low Doc Calculator to see if the verifications you currently hold are sufficient to obtain a low documentation mortgage.
Who can benefit from a low doc loan?
Low doc home loans are designed to assist those who have a deposit saved, or have existing equity in a property, but are self employed and have difficultly showing proof of their income. They can also be of use to professional investors, people with fluctuating incomes or people that have had a low income in the last financial year.
Being self employed you may not be able to qualify for a normal home loan; as such the low doc opinion could be the right fit for you, as minimal documentation is required to qualify for this type of loan.
You may be able to borrow up to 80% LVR (80% of the value of your property) by providing alternative income verification documents such as financial statements, business bank statements, BAS statements or an accountant’s letter. One of our lenders does not require you to verify your income at all!
To see if you will qualify with a lender for a low doc loan why not try out our low doc calculator or submit an enquiry online.
How has low doc lending changed?
In the past, you would have been able to obtain a self-certified low doc home loan; also if you had an ABN that had been registered for over two years it was easy to get approved for a low doc loan.
However, after the Global Financial Crisis and introduction of the NCCP Act by the Australian Government, the banks tightened their lending criteria.
Which means that the banks now require proof of income, in particular several types of home loans are now very difficult to finance:
- Low Doc Loans for companies and trusts.
- Equity releases, known in the industry as “Cash Out” loans.
- Construction loans.
- Refinances, particularly of Non-Conforming Lenders or of existing Low Doc Loans.
- Asset Lends/No Doc Home Loan.
- Applicants a bad Credit History.
However, we do have lenders that can assist with most of the above loan types. Please enquire online to discuss your situation with one of our mortgage brokers.
Getting approved for a low doc mortgage
Getting approval for your loan isn’t as easy as it used to be we recommend that you take this three step process to maximise your chances of being approved by the bank:
- Find out which lenders you qualify with (use our low doc loan calculator),
- Select the lender with the lowest interest rate, fees, LMI premium and who has the required loan features,
- Only provide the paperwork that is requested on the lender’s application checklist.
Did you know that if you provide partial proof of your income (e.g. one old tax return) then some lenders are required to now ask you for full financial statements and tax returns for all entities? This is because if a lender sees a document, they cannot ignore it when completing their assessment. To avoid this issue please only provide the documents requested by the lender, nothing more!
What loan features are available?
You can get almost all of the normal home loan features with your low doc loan.
- Interest only,
- Extra repayments,
- 100% offset,
- Line of credit,
- Fixed interest rates,
- Split loans (multiple loan accounts),
What is generally not available with a low doc are third party guarantees (e.g. parents guaranteeing your loan), introductory interest rates, repayment breaks and in some cases security substitution. In most cases you would need to lodge a new application so that the lender’s credit department could review your situation at the time that a repayment break or new security property was required.
Apply for a low doc loan
Which lender has the lowest interest rates? Which has the lowest LMI premium for their low doc loans? Which lenders do you qualify with?
Our mortgage brokers specialise in low doc mortgages. They can quickly assess your situation and get back to you with the two or three best options. Please call us on 1300 889 743 or enquire online to go through your situation with an expert.
