No Doc Loan

Any general questions you might have in regards to loans and finance.
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Joined: Wed Apr 07, 2010 4:30 pm

No Doc Loan

Postby Katrina » Wed Apr 07, 2010 4:35 pm

hello :)

Couple of questions on no doc loans otto. how will the lenders know ive used a no doc loan for business / investment purposes? what is the maximum loan term for such loans?
usually how high are the interest rates?


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Otto Dargan
Mortgage Specialist
Posts: 7728
Joined: Sat Sep 06, 2008 5:55 pm
Location: Sydney, Australia

Re: No Doc Loan

Postby Otto Dargan » Thu Apr 08, 2010 8:45 am

Hi Katrina,

There are many variations on no doc loans so to say you are after a no doc loan isn't enough information for us to be able to get you an interest rate quote.

No doc loans generally come in several types:

    2nd mortgages: Very expensive short term loans often secured by a caveat or 2nd mortgage behind your existing lender. Rates are 2% to 8% per month (24% p.a. to 96% p.a.!).
    Non conforming loans: Generally these are 1st mortgages that are kept for 1 - 3 years and are designed for people with impaired credit or who need a large amount of cash out. Rates vary from 8% to 14% p.a.

If you can qualify for a low doc loan instead of a no doc loan then I would highly recommend that you apply for that instead! Low docs are far cheaper as there is significant competition between lenders.

Each lender varies on their method of determining that your loan is for investment purposes. Some lenders ask for evidence of what you are doing with the money such as a contract for the investment property you are buying, a letter from your financial planner confirming you are buying shares etc. Other lenders are happy to just take your word for it.

All short term lenders are more concerned about the exit strategy, how will the loan be repaid? Usually short term no doc loans are repaid when the property is sold. Longer term no doc loans do not require evidence of an exit strategy.

Loan terms are generally for a maximum of 5 years on an interest only basis with the loan repaid in full at the end of 5 years. However again this varies between lenders and I believe some can still offer a 30 year term in some situations.
Otto Dargan
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P | 1300 889 743
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