What are the differences between low doc and full doc?

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Garfie
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Joined: Thu May 16, 2019 6:12 pm

What are the differences between low doc and full doc?

Postby Garfie » Thu May 16, 2019 6:13 pm

Hi, I’m looking to purchase a $680,000 investment property. I own a few fashion boutiques and have up to date tax returns. The problem being that the last two years taxable income is extremely low as we have been reinvesting most of it back into the business itself. Come July, our taxable profits this year is estimated to be around $110,000. I was advised a low doc loan could be a suitable solution for my current needs, can you tell me the differences between low doc and full doc?

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Otto Dargan
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Re: What are the differences between low doc and full doc?

Postby Otto Dargan » Thu May 16, 2019 6:52 pm

Hello Garfie. Welcome to the forums.

Yes, a low doc home loan is a suitable option for self-employed borrowers whose income documents do not reflect their actual income.

To qualify for a full doc or a standard home loan as a self-employed borrower, you’d need to provide at least 2 years tax returns and Notice of Assessment, 2 years personal tax returns, and 2 years business financial statements. The banks will assess your income based on those documents.

Whereas, to qualify for a low doc loan, you can use one or a combination of these documents to declare your income:
Below are some key characteristics of low doc loans:
  • Higher interest rates: The interest rates you qualify for will depend on the sort of income verification documents you can provide. Some of our lenders offer the same low rates as full documents home loans.
  • Larger deposits: 20% of the purchase price is typically required although, a few of our lenders require less.
  • Lenders Mortgage Insurance (LMI): LMI is generally applicable for any home loans that are above 80% LVR, whereas, in the case of low docs, any loan over 60% LVR will incur LMI.

We specialise in helping self-employed borrowers get approved for a mortgage.
Speak with one of our specialist mortgage brokers by giving us a call on 1300 889 743 or by filling in our free assessment form to find out if you qualify for a low doc home loan.

Cheers,
Otto Dargan
Mortgage Broker
P | 1300 889 743
Home Loan Experts

Garfie
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Joined: Thu May 16, 2019 6:12 pm

Re: What are the differences between low doc and full doc?

Postby Garfie » Thu May 16, 2019 7:14 pm

Yeah, I could provide the last 12 months BAS statements, how will the lenders assess my income from those statements?

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Otto Dargan
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Re: What are the differences between low doc and full doc?

Postby Otto Dargan » Thu May 16, 2019 7:50 pm

Hi Garfie,

Lenders will calculate your gross annual turnover figure from each quarter of your BAS statements and then use 40% of the turnover as your income. Some of our lenders will consider up to 50% of your turnover as income. The percentage that the lenders will consider also depends on the industry that you’re in, in other words, it tends to vary from lender to lender.

You can use our BAS income calculator to calculate your assessable income.

Cheers,
Otto Dargan
Mortgage Broker
P | 1300 889 743
Home Loan Experts

Garfie
Posts: 3
Joined: Thu May 16, 2019 6:12 pm

Re: What are the differences between low doc and full doc?

Postby Garfie » Fri May 17, 2019 12:47 pm

Right on! In a year or two, my tax returns will be up to date, so are there any restrictions I need to be aware of if I want to refinance the low doc loan?

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Otto Dargan
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Re: What are the differences between low doc and full doc?

Postby Otto Dargan » Fri May 17, 2019 1:17 pm

Hi Garfie,

It is pretty straight forward to refinance your low doc home loan to a full doc, provided you have all the necessary documents ready. Like I mentioned earlier, you’ll need to provide your last 2 years business and personal tax returns and NOA, as well as 2 years’ financial statements to qualify with a major lender with the best competitive interest rate.

You’ll want to make sure not to fix your interest rates or fix it for a short period if you wish to refinance later on as you might incur break costs. If you’re unsure, a variable rate might be a better option here.

Our mortgage brokers specialise in low doc loans and choosing the best option for you from our panel of almost 40 lenders.

Give us a call on 1300 889 743 or fill in our free assessment form to find out if you qualify for an alternative document home loan.

Cheers,
Otto Dargan
Mortgage Broker
P | 1300 889 743
Home Loan Experts


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