Good morning,
It has been more than eight months since I first thought of getting a commercial investment property. After loads of research and hunting, I have now finally made up my mind to get one in the outskirts of Adelaide. The property is valued at $780,000 and I do not have the entire sum amount so I want to take out a mortgage.
Because I am in a bit of a situation, a friend told me that there was a ‘lease doc loan’ out there that could help me finance the purchase. The thing is, I have never heard of it before. Can anyone in this forum explain it to me?
Help me understand a ‘lease doc loan’
- Otto Dargan
- Mortgage Specialist
- Posts: 7730
- Joined: Sat Sep 06, 2008 5:55 pm
- Location: Sydney, Australia
- Contact:
Re: Help me understand a ‘lease doc loan’
Hello crackle88 and welcome to the forums.
If you take out a lease doc loan then you will not require full evidence of your income. Instead, in this type of loan, the lender relies upon the strength of the rent income from the property used to secure your loan.
Although this may be similar to a low doc commercial loan, this is different in terms of:
Cheers,
Otto
If you take out a lease doc loan then you will not require full evidence of your income. Instead, in this type of loan, the lender relies upon the strength of the rent income from the property used to secure your loan.
Although this may be similar to a low doc commercial loan, this is different in terms of:
- Borrowing power: You may only be able to borrow up to 70% of the property value.
- Documents required: You do not need to provide any payslips, tax returns, or financial statements.
- Security property: The security must be a commercial investment property.
- Lease term: A minimum lease term is defined by many lenders.
- Lease property: Your lease must not be to your own company.
- Lease income: You must have a lease income sufficient enough to cover the interest on your loan.
- Self funded retirees,
- People with a complex financial situation, or
- Self employed borrowers with no income evidence.
Cheers,
Otto
Re: Help me understand a ‘lease doc loan’
Hi Otto,
I am actually a self employed borrower and I do not have much income evidence. I hesitated to explain my situation earlier because I did not think I would get a good answer in this forum. I am glad to have been mistaken.
I was thinking of leasing it to my own business but it seems like I cannot. What property can I lease to then?
I am actually a self employed borrower and I do not have much income evidence. I hesitated to explain my situation earlier because I did not think I would get a good answer in this forum. I am glad to have been mistaken.
I was thinking of leasing it to my own business but it seems like I cannot. What property can I lease to then?
- Otto Dargan
- Mortgage Specialist
- Posts: 7730
- Joined: Sat Sep 06, 2008 5:55 pm
- Location: Sydney, Australia
- Contact:
Re: Help me understand a ‘lease doc loan’
Hi crackle88,
A lease to your own business does not count as income evidence. If you are planning on leasing to a family member’s business or to a related business entity then it also does not count. If you are leasing the property to a related party then you should consider a commercial low doc loan instead.
It should be noted that lease doc loans are not used to release funds for your own business. These loans are for purchasing or refinancing a commercial investment property.
The lenders tend to be very strict on the types of properties that can be taken as security. This is because they do not have the knowledge of your capacity to make repayments using other income sources.
In order to be acceptable, your property must be:
Cheers,
Otto
A lease to your own business does not count as income evidence. If you are planning on leasing to a family member’s business or to a related business entity then it also does not count. If you are leasing the property to a related party then you should consider a commercial low doc loan instead.
It should be noted that lease doc loans are not used to release funds for your own business. These loans are for purchasing or refinancing a commercial investment property.
The lenders tend to be very strict on the types of properties that can be taken as security. This is because they do not have the knowledge of your capacity to make repayments using other income sources.
In order to be acceptable, your property must be:
- A non-specialised commercial property, e.g. a retail, industrial, office, or warehouse.
- Located in a regional or a major metropolitan area.
- In easily accessible locations. However, a select few lenders may consider any location on its merits albeit at a lower Loan to Value Ratio (LVR) and loan amount.
Cheers,
Otto
Re: Help me understand a ‘lease doc loan’
That sounds like something I will be able to get my hands on. It seems I have clearly misjudged the usefulness of this forum. I had stumbled here on a fluke and asked for help simply on a whim. This turned out to be an extremely fortunate event! Thank you for all your help, Otto. I will be sure to have a look at your website and give you a call to discuss things more. Looking forward to speaking with you
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- Posts: 33
- Joined: Wed Jul 17, 2013 7:28 pm
Re: Help me understand a ‘lease doc loan’
Hello. This thread helped me understand that I won’t be needing any evidence of income if I take out a lease doc loan. However, it seems like I may not be able to take one out (as currently, I don’t have anything I can lease to) so I think I’ll be going for a low doc commercial loan instead. What will I need to provide?
- Otto Dargan
- Mortgage Specialist
- Posts: 7730
- Joined: Sat Sep 06, 2008 5:55 pm
- Location: Sydney, Australia
- Contact:
Re: Help me understand a ‘lease doc loan’
Hi Curious George,
In most cases, you will need to have a registered ABN and sign an income declaration which confirms your current income. In addition to this, you may also need to provide additional documents such as:
Cheers,
Otto
In most cases, you will need to have a registered ABN and sign an income declaration which confirms your current income. In addition to this, you may also need to provide additional documents such as:
- An accountant’s letter,
- BAS statements,
- Bank account statements, and
- A copy of the commercial lease agreement or your rental history.
Cheers,
Otto
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- Posts: 33
- Joined: Wed Jul 17, 2013 7:28 pm
Re: Help me understand a ‘lease doc loan’
Sounds good. I’ll be calling your office by the end of the week to learn more. Thanks and bye.