Refinance with a low doc loan

Yes it is possible to refinance!

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 rates.

Thankfully some lenders still have low doc refinance loans available! Read on to find out how to get a great rate with your new loan.

What are the rules for refinancing a low doc loan?

Although credit criteria vary depending on each lender, 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.
• You have made your payments on time every time for the last 6 months.
• If you are borrowing over 60% of the property value then you must have an ABN.
• Business, investment and personal purposes for borrowing money are all accepted.

How much can you borrow when refinancing?

The documents you require to refinance your loan depend on the percentage of the property value that you need to borrow. This is known as the LVR.

• If you are borrowing up to 60% of the property value then no bas statements are required.
• If you are borrowing up to 75% of the property value & are refinancing from a major lender then no BAS statements are required.
• If you are borrowing up to 80% of the property value then you will need to provide BAS OR an accountants letter to support the income that you declare. This loan is also available for companies, trusts and even for low doc refinances with construction!
• The maximum loan amount is $1,000,000 at 80% LVR and there is no maximum loan amount at 60% LVR.

Lending policy can be quite complex and many other factors such as GST registration, credit scoring, the industry you are in, the location and size of your security property and the type of loan you are refinancing are all taken into account. For this reason we recommend that you enquire online so we can go through your situation in detail.

Can I consolidate debt when I refinance my low doc loan?

Yes it is possible to borrow additional money when refinancing with a low doc loan to pay out other debts or for other purposes that you choose. 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 with your refinance, the lender will need to see your current loan statements to ensure your loans have been paid on time. If it hasn’t then talk to us to find out about lenders that can help even though you have missed payments on your current loans.

What can I use my refinance funds for?

Most lenders do not restrict what you use your money for. You can invest in shares or property using an investment loan, or buy a new place to live using the equity in your investment. Renovations, knock down and rebuild as well as most personal or domestic purposes are fine with a low doc loan. Recently there have been some difficulties funding low doc construction loans that also require a refinance, read below for more info.

Many lenders have restrictions on equity releases, known in the finance industry as “cash out”, which is money released directly to the borrower with little if any evidence as to what the funds are being used for.

Low doc refinance & construction loans

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. Funnily enough if you are buying the block of land and building at the same time 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 even consider your loan!

The reason for this is that the lenders that can accept refinances, often do not accept construction loans. And the ones that can accept both have issues with their credit scoring or they require BAS statements. There are some lenders that can consider this type of application, usually with an accountant’s letter or BAS to help prove your income. Please enquire online to talk to one of our specialist low doc mortgage brokers.

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, most will allow you to take this option with a low doc loan, enabling you to get your money faster!

Are there any equity requirements?

When refinancing a low doc loan most lenders will not allow you to borrow more than 80% of the value of your property (80% LVR). If you are borrowing between 60% and 80% of the value of your property some lenders will ask you to pay an LMI premium. A select few lenders will consider refinances where you are borrowing more than 80% of the value of your property however the interest rates can be 3% to 4% above that of a low doc loan at 80% of the property value.

Besides these rules, most lenders also have a no negative equity policy. What this means is that if your total assets are less than your total liabilities your loan will be declined! Look out!

What are the Low Doc Loan Interest Rates for refinances?

In most cases we are able to get you a rate that is actually below the Bank Standard Variable (BSV) Rate. Because everyone’s situation is different we would recommend that you contact one of our mortgage brokers to find the applicable interest rate for your loan. When refinancing also consider the cost of LMI, setup fees and exit fees for your current lender. We can help explain all the costs of switching banks to help you make a logical decision.

It is ESSENTIAL to check the rate on your current loan

Why? Because in the last five years the interest rates and fees on low doc loans have reduced significantly due to competition! In addition to this some lenders have had funding difficulties, as a result the interest rates on their low doc loans have increased significantly. If your loan is over two years old you should check to see if it is still competitive.

If your lender is making a killing out of your loan they aren’t going to call you up and tell you to change! It’s up to you to talk to us and see what else is available. Best of all you can access your equity for other purposes as part of your refinance!

Adelaide Bank & Rams did what?

The recent sub prime lending crisis has had a large effect on some lenders, particularly on the cost of funding their low doc loans! Adelaide Bank is both a retail (direct to the public) and wholesale (re-branded through other companies known as originators) lender that has lent out large numbers of low doc loans in recent years.

Due to the shift in the cost of funds, Adelaide Bank has increased their low doc interest rates significantly more than most other lenders! If you are with Adelaide Bank you should check to see if your loan is still competitive! By refinancing you may be able to cut the equivalent of several reserve bank rate increases off of your home loan!

Some of the other wholesale funders have also increased their low doc interest rates. Wholesale lenders such as Perpetual Limited, PUMA or Perpetual Trustees Australia Limited (or variations on this name) have been re-branded as Aussie Home Loans, Virgin Money, Mortgage House, Yes Home Loans and a variety of other non bank lenders. All these lenders have been affected too.

Adelaide Bank which has recently merged with Bendigo Bank has wholesale low doc loans re-branded through Great Pacific, Domain Financial Services, AFG Mortgage Management, Mortgage Ezy, National Mortgage Company (NMC), Mortgage House, Homeloans Limited and a variety of other non bank lenders.

Rams / RHG unfortunately suffered during the global financial crisis and was unable to borrow at a low rate to fund its loans. As a result the Rams brand was sold to Westpac and the old company became RHG Limited. RHG has increased the rate on many existing customers, which resulted in large number of customers refinancing to another lender.

Please enquire online or call us to discuss how we can help you refinance to a competitive deal!

Turn lemon into lemonade by switching banks

If your bank is no longer competitive then why stay with them? The cost of a mortgage over thirty years can be substantial, and a higher rate can make a huge difference to your bottom line. Some of our customers also elect for a shorter loan term with higher repayments, allowing them to repay their loan even sooner!

Firstly we assess your potential savings and determine how much you will benefit by changing banks. Then we will complete an application and send it to the new lender whilst at the same time arranging the discharge of your old loan with your old bank. 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. Switching banks has never been easier!

How do I apply to refinance with a Low Doc Loan?

We are specialists in Low Doc Refinances and can help you find the right lender. Just go to our enquire online section and send us your details. We’ll be in touch with a few competitive quotes for your new, cheaper low doc loan!