What kinds of low doc loans can I get?

Any general questions you might have in regards to loans and finance.
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adamsj
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Joined: Wed Apr 07, 2010 12:18 pm

What kinds of low doc loans can I get?

Post by adamsj »

Hi

I am a freelance designer cum photographer with my own business. I usually contract out to companies for smaller projects and even some magazine for certain types of photoshoots around the year.

I have been told by the banks to apply for a low doc home loan instead of the normal type of home loan due to my employment / source of income but haven’t really been told more than that.

On the other hand I’ve also been told that the banks don’t really do much for people with their own businesses so I wanted to find more about these low doc loans from a mortgage broker instead.

Anyway can you tell me what kind of low doc loans there are?

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Otto Dargan
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Re: What kinds of low doc loans can I get?

Post by Otto Dargan »

Hi and welcome to the forums adamsj,

There are a wide range of loan types you can get under a low doc home loan.

First of all if you are borrowing a smaller amount you can try for a basic low doc loan where you can get a discounted rate for amounts as low as $100,000.

If you intend to borrow over $250,000 then you can also go for a professional package low doc loan. This will allow you to get extra facilities along with a rate discount on your loan and other loans for an annual fee. Some of the features of a professional package include an offset account, cheque account and credit card. Some lenders also offer discounts on insurance facilities.

You can also go for a fixed rate low doc loan and lock in your rate for 3 years, 5 years or even 15 years. While some lenders charge a premium on fixed rate low doc loans some lenders will even offer you a discounted fixed rate if you are going for a professional package.

Lastly you can also get a line of credit low doc where you can use the loan account just like a normal bank account. This allows you to withdraw money directly from the ATM, write cheques, use a credit card, etc. While most lenders do not offer low doc loans with a line of credit due to the perceived higher risk you can still get discounted rates on a line of credit with a professional package.

Cheers,
Otto
Otto Dargan
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moodyjack
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Joined: Wed Jun 17, 2009 4:36 pm

Re: What kinds of low doc loans can I get?

Post by moodyjack »

I’m also getting a low doc home loan but my bank said that it wouldn’t be possible to borrow more than 80%. Is it possible for you brokers to negotiate for a larger loan amount then?

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Otto Dargan
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Re: What kinds of low doc loans can I get?

Post by Otto Dargan »

Hi moodyjack,

Yes the banks in Australia can be limited by their mortgage insurers and restrict the loan amount to 80% of the property value. However as mortgage brokers we have access to non-bank lenders as well who can approve higher loan amounts for low doc loans.

While you can get a low doc loan over 80% with a specialist lender, you will be paying a higher interest rate. For example, an 85% low doc loan has an interest rate of over 9% per annum while a 90% low doc loan has an interest rate of over 10%.

Now while the average loan period is 30 years, when you are getting a high lend low doc you should aim to reduce your loan to 80% as fast as possible and refinance it for better rates.

Please keep in mind that a 90% low doc loan is harder to get due to the larger loan amount and you would have to meet the following requirements:
  • You have to be purchasing
  • The property you are buying should be a standard house, apartment or town house
  • The property you are buying should be located near a capital city
  • You should have a clear credit history
  • You must be self-employed for more than a year
A 90% low doc loan is very risky and the cost of the loan is such that it is not the best option. We would only recommend it to someone who has a found a property which is an amazing investment opportunity.

Cheers,
Otto
Otto Dargan
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P | 1300 889 743
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adamsj
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Re: What kinds of low doc loans can I get?

Post by adamsj »

Hi, I’m back again… went through all that you said and I’ll probably get the professional package since I definitely need to borrow more than $400,000 for the home loan.

Anyway my friend was telling me that I should try to avoid paying LMI for my loan if I wanted to save money. How do I make that happen?

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Otto Dargan
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Re: What kinds of low doc loans can I get?

Post by Otto Dargan »

Hi adamsj,

The easiest way to avoid paying LMI for your home loan is to borrow less than 60% of the property value (80% for a full doc loan). Another option available from our lenders is to provide limited income evidence such as interim financial statements and BAS from the last 12 months (if you are less than 70% of the property value).

You can also provide an old tax return and BAS if you are borrowing up to 90% or two year old tax returns if you want to borrow up to 95%. One of our lenders will even waive the LMI fee or risk fee for a loan up to 70% of the property value.

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

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adamsj
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Re: What kinds of low doc loans can I get?

Post by adamsj »

Risk fee? Is that the same as the LMI fee or not? Or is it more?

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Otto Dargan
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Re: What kinds of low doc loans can I get?

Post by Otto Dargan »

Hi adamsj,

Some lenders self-insure their loans by charging a risk fee instead of an LMI fee. This means that they do not use a mortgage insurance provider however to the borrower the effect is the same.

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

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