Explain a few things about a lease doc loan

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Amber
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Joined: Wed Jul 31, 2013 4:54 pm

Explain a few things about a lease doc loan

Post by Amber »

Hi. I’ve been living with my boyfriend in a rented apartment in Welpa for almost two years now. I’m working as a receptionist and I earn $36,000 a year, and my self-employed partner earns close to $58,000 a year.

We’ve been thinking of investing in a commercial property. We’ve not yet decided on what type of loan to take out but we’re currently looking into a lease doc loan. We know how much we can borrow so can anyone tell us a few things about this type of loan aside from that?

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Otto Dargan
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Re: Explain a few things about a lease doc loan

Post by Otto Dargan »

Hello Amber.

Welcome to the forums.

In most cases, major lenders do not tend to offer lease doc loans. If you want to take one out, you may need to seek out a second tier, non-bank, or a specialist lender.

The majority of lenders tend to be stricter on the types of properties that can be taken as security. The primary reason for this is because they have no guarantee that you have the capacity to make repayments using other income sources.

Your security property must also fulfil certain requirements in order to be acceptable. In most cases, your property must be:
  • A non-specialised commercial property like retail property, industrial property, an office or, a warehouse.
  • Located in a major metropolitan area or a regional area.
  • In a good and accessible location. However, few lenders may be able to come to a compromise for a lower Loan to Value Ratio (LVR) and loan amount.
The loan terms on offer may not be the same between all lenders. Most lenders review the loan term in line with the renewal of the lease. However, others may have a set 5, 15, or 25 year term. Additionally, interest only periods may be considered depending upon the interest cover you have and the term of your lease.

Hope this covers the majority of your concerns.

Cheers,
Otto
Otto Dargan
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Amber
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Joined: Wed Jul 31, 2013 4:54 pm

Re: Explain a few things about a lease doc loan

Post by Amber »

Yeah it does, thanks. That doesn’t sound all too bad. Can you also tell us how we may be able to get the loan approved at a competitive interest rate?

FYI, although we’re getting the property for business purposes, we could also be living in the property itself. Hope this doesn’t make a difference.

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Otto Dargan
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Re: Explain a few things about a lease doc loan

Post by Otto Dargan »

Hi Amber,

If you want to get your loan approved at a competitive interest rate then you may be able to do so by reducing your loan amount to 60% or less of the property value and saving up a larger deposit.

In many cases, if you have a large deposit then you may be able to get an interest rate below than the standard rates offered by many lenders. However, if you have a small deposit, low interest cover ratio, and your security property is not ideal, then you may have to pay a higher interest rate.

Please note that the purpose of your commercial property loan will affect how your loan is assessed. This means that if you are taking out the loan for investment purposes like buying or refinancing a commercial property that will be leased, then it is likely to be considered a low risk. However, owner occupancy is likely to be considered a medium risk.

You can find out more about all of this by browsing through our website. If you want to discuss your situation with one of our brokers then you can reach us directly on 1300 889 743 or fill in our free assessment form.

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

Amber
Posts: 53
Joined: Wed Jul 31, 2013 4:54 pm

Re: Explain a few things about a lease doc loan

Post by Amber »

Aw, man! And here we were thinking owner occupancy wouldn’t make any difference at all. Doesn’t matter I guess… Thanks for all your help, Otto. We’re planning on giving you a call by the end of the week. In the meantime, we’ll be going through your website :)

dawnmason
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Re: Explain a few things about a lease doc loan

Post by dawnmason »

Hi all,

I’m also planning on taking out a commercial property loan so I browsed through this thread to learn about lease doc loans. However, it’s seeming more and more likely that I’ll have to take out a no doc commercial loan instead. Can anyone give me a basic understanding of such a loan?

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Otto Dargan
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Re: Explain a few things about a lease doc loan

Post by Otto Dargan »

Hi dawnmason,

If you take out a no doc commercial loan then:
  • You may be able to borrow up to 65% of the property value.
  • No income evidence is required.
  • Investment properties such as offices, warehouses, factories, or retail properties in capital cities are preferred.
  • You may be able to qualify even if you have a bad credit history.
Please note that with a no doc commercial loan, you may have to pay an interest rate that is typically three to four per cent higher than competitive rates.

The pricing is variable-based on the lenders that you qualify with, your credit history, the percentage of the property value that you borrow, and the overall risk of your application.

You can have a look at our website or give us a call to learn more about no doc commercial loans.

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

dawnmason
Posts: 47
Joined: Thu Jun 27, 2013 3:43 pm

Re: Explain a few things about a lease doc loan

Post by dawnmason »

I see. Thanks for your help. I had a look at your website and I find it truly amazing. It’s very easy to understand and simple to browse through. I’ll be calling your office on Monday to schedule a meeting with one of your experts. Goodbye.

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