Did you know that most major lenders will no longer approve low doc loans that are used to refinance an existing home loan?
This leaves many people high and dry when they need money the most and leaves others stuck on older loans at much higher interest rates.
Thankfully some lenders will still refinance a low doc loan!
Can I refinance using a low doc loan?
Although lending guidelines vary between lenders, we can usually help you to refinance your existing loan if you are in the following situation:
- You are borrowing up to 80% of the value of your property.
- Your credit history is clear (some exceptions are made).
- You have made your payments on time every time for the last 6 months (some exceptions are made).
- You must have an ABN.
- If you are releasing equity then you may need to provide evidence of the purpose of your loan.
- You must provide either BAS, an accountant’s letter or business bank statements to verify your income.
- Borrowing money for business, investment or personal purposes are accepted.
If you need help to refinance your loan, then please call us on 1300 889 743 or enquire online and one of our mortgage brokers will call you to discuss the options that are available to you.
What are the other qualifying criteria
You can borrow up to 80% of the value of your property up to a maximum of $1,000,000. If you are borrowing 60% of the value of your property then some of our lenders have no maximum loan size.
Other lending policy can be quite complex, however as a general rule, these factors will influence your application:
- GST registration.
- Credit scoring.
- The industry that you are in.
- The location and size of your security property.
- The type of loan that you are refinancing.
Please call us on 1300 889 743 or enquire online and one of our mortgage brokers will work out which lenders can help with your refinance.
How can we help?
- Firstly we assess your potential savings and determine how much you will benefit by changing banks.
- Then we will complete an application for the new lender whilst arranging the discharge of your old loan.
- After your loan is approved, a loan offer will be sent to you for you to read and sign.
- When this is returned the new bank meets with your old bank and pays them out.
Unlike most mortgage brokers, we specialise in low doc loans. As a result we can quickly find you the best possible solution.
Send us an online enquiry or call us on 1300 889 743 to receive some competitive quotes for your new, cheaper low doc loan.
What can I use my refinance funds for?
You can release equity to be used to buy a new home, investment property, shares or for any other worthwhile legal purpose.
If you are using the money for your business then some lenders will decline your loan, whereas others will see your application more favourably.
As a general rule, if you are releasing more than $50,000 in equity, most lenders will need to see evidence of what you are using the money for. This is known as a cash out restriction.
Can I consolidate debt?
Yes it is possible to consolidate your debts into your mortgage, however only a few lenders allow this with a low doc loan.
If you have a credit card at 18% and a personal loan at 13% then why not roll them into one easy repayment at low home loan rates?
When consolidating debts, the lender will need to see your current loan statements to ensure your loans have been paid on time. Even if repayments have been late or missed, we have some lenders that can consider your application.
What if you need the loan to build?
Due to some recent policy changes, there are now very few options for people who own a block of land and now want to build.
If you are buying the block of land and building at the same time (this is known as a land and home package) then it is quite easy to get a low doc loan. However if you own the land and have a loan on it already, then there are very few lenders that can help you.
The reason for this is that the lenders who can accept refinances often do not accept construction loans. The lenders that can accept both tend to be very strict, so few people qualify.
There are some lenders that can consider this type of application, usually with an accountant’s letter or BAS to help support your declared income.
Why are refinances unacceptable to many lenders?
Lenders and mortgage insurers analyse their existing borrowers and work out which customer types have a high chance of being late with their repayments.
Several lenders have identified that many people refinancing an existing low doc loan into a new low doc loan are a high risk customer type.
In addition to this one of the mortgage insurers, QBE LMI, introduced a formal policy stating that they will not approve a low doc loan if the purpose is to refinance an existing loan.
Have you checked your interest rate?
During the GFC many lenders increased the interest rates for their existing customers with low doc loans, much more so than they did for people with normal home loans.
In addition to this, some lenders have had funding difficulties, and as a result the interest rates on their low doc loans have increased significantly.
However, since the GFC the interest rates and fees on low doc loans have reduced significantly due to competition.
If your loan is over two years old you should check to see if it is still competitive. Please call us on 1300 889 743 or enquire online to see how much we can save you in interest.
Does a rapid refinance work with a low doc?
A rapid refinance is also known as a Quick Refi, Priority Refinance XRO, FastRefi or Express Refinance. This is where your refinancing lender advances your new low doc loan before your old lender has given them your property title deeds as security.
They can do this because of title insurance, which they use to protect themselves in case something goes wrong and their loan is left unsecured.
Although the exact process may differ from lender to lender, some will allow you to take this option with a low doc loan, which means that you can release your equity must faster.