Help! My bank won’t let me borrow more than 80%!
That’s right! Banks are limited by their mortgage insurers as to how much they can lend. As a general rule they just can’t approve loans over 80% of the value of your property.
Luckily banks are not the only lenders in Australia that can allow you to self certify your income without providing tax returns.
90% low doc
Borrowing up to 90% LVR is possible with a low doc loan but the rate will be upwards of 9%. Expect to pay over 9% p.a. for this type of loan. Only the bravest of lenders are willing to approve loans with no income evidence and a smaller deposit.
The qualifying criteria for a 90% high lend low doc are:
- Purchases only (no refinances)
- Security must be a standard house/apartment/townhouse located near a capital city
- Clear credit history
- Must be self-employed for greater than one year
Our recommendation is to only apply for a 90% loan if you can soon prove your income or can reduce your loan to 80% of the property value quickly. That way you do not need to pay a higher interest rate for a long time.
85% low doc
IMPORTANT: 85% low doc loans have an interest rate over 8%.
Yes it is possible to borrow more than 80% LVR! However don’t expect to get the same interest rates offered by the major banks. Interest rates are generally more than 8% p.a. for this type of loan.
This is not a long term loan, although the term is 30 years, you should aim to reduce the loan down to 80% and refinance it as soon as possible. This type of loan is ideal for anyone consolidating debts, purchasing a new home or investing in a high growth area.
What if you have full evidence of your income? Then instead of a low doc try applying for a normal 85% home loan.
There are no lenders able to offer no deposit low doc loans. Sorry, you’ll have to save a deposit or complete your tax returns to be able to buy a property. Read on to find out the other way you can still buy a property…
So how do I buy a property with no deposit?
Many people have had no deposit but have still been able to buy a property with a low doc loan. How did they do it?
Your parents can obtain a loan using their home and then lend it to you as your deposit. You can then make payments on both loans and in time increase your loan to pay them out completely. This is a simple arrangement that works effectively for many first home buyers.
Over 60% of first home buyers obtain some help from their parents, so don’t feel bad about asking your parents for help. Many banks will decline your low doc loan if you have borrowed your deposit or received a gift from your parents. Only a select few lenders do not require you to save a deposit.
Enquire online to find out which lenders don’t require genuine savings for their low doc loans. We recommend that you and your parents obtain independent legal and financial advice before they lend you money for you to use as your deposit.
LMI & risk fees
Lenders Mortgage Insurers (LMI) tend to be very restrictive with high lend low doc loans. As a result many lenders charge a risk fee instead of obtaining LMI. What does this mean for you?
Basically you still pay a once off fee when the loan is set up. The name has changed however the overall effect is the same. Risk fees vary between lenders so be sure to shop around to get a competitive deal!
Three tips when applying for a high lend low doc loan
- This is not a long term loan. Aim to reduce the loan down to 80% and refinance it as soon as possible.
- Don’t forget to factor in a risk fee when calculating all the costs of the loan. Often for high lend low doc loans the risk fees are substantially higher and range between 2%-3% of the total loan amount.
- The lenders are taking a much greater risk with high lend low doc loans, as a result they are especially strict on the kind of security used. They are only willing to accept standard residential properties located in the capital cities.
Apply for an 85% or 90% low doc
Enquire online or call us on 1300 889 743 to find the lender right for your low doc loan! We’ll help you choose a competitive loan from our panel of specialist low doc lenders.