Building a home is easy with a low doc construction loan!
In the past, low doc loans were not available for construction purposes but some major banks now have more flexible lending criteria.
This means that you may be able to obtain finance for your next big construction project. Read on to find out how!
How much can I borrow?
We can help you borrow up to 80% of the value of the land plus the cost of construction. However, you must meet the following lending criteria:
- You must be using a licensed builder (or you must be a licensed builder).
- You must have an ABN.
- You must be able to provide evidence of your income using either BAS, an accountant’s letter or bank statements.
What if you do not meet this criteria? Then we can help you using a development loan as long as you have a large deposit.
How do I qualify?
Most banks will only lend for your project if you have a licensed builder with Home Building Compensation (HBC), formerly known as Home Warranty Insurance or your state equivalent.
Banks want the security offered by a formal building contract backed by insurance.
When should you apply for a mortgage?
Please enquire online or call us on 1300 889 743 approximately four weeks before starting construction.
Remember that the cheapest lenders are also the most popular!
If you want the best low doc construction loan then be prepared to wait a few weeks for the lender to process your application.
Get a low doc construction loan today!
Are you self-employed? We know which banks will approve your loan, without the need for tax returns and other financials.
Enquire online or call us on 1300 889 743 to find out how you can get a low doc construction loan with great interest rates.
Low Doc Construction
What types of construction projects can be financed?
You can use the funds to put towards the construction of:
What if I am a developer?
The amount that you can borrow will vary, however in most cases we can help you borrow up to 80% of the cost of the project or up to 70% of the on completion value, whichever is the lesser.
Banks will not approve a low doc loan for a developer as developers have an inconsistent income, often waiting years before receiving the profit from their projects.
This is why specialist loans have been created for developers so that the loan has a confirmed exit date and capitalised interest to avoid the need for repayments.
Knock down and rebuild
Banks can do knock down projects if you have plenty of equity in the land.
Typically they will look at lending up to 80% of the land value plus the knock down and construction costs.
If the demolition costs are significant or your new house is considered to be overcapitalising for your area then you may run into trouble! This is when we come in.
As a specialist low doc mortgage broker we know which lenders are the most lenient with their construction lending guidelines.
Make your renovation a dream!
Turn your renovation nightmare into a renovation dream by cashing up with a low doc loan!
If your renovation is through a contract builder you can usually get your low doc loan approved without too many hassles.
If the renovation work is minor, cosmetic or you will DIY (Do It Yourself) then we can get you a low doc renovation loan that relies on the equity in your current property.
This way you can deposit the funds into your cheque account straight away without the need for the bank to do progress inspections!
By keeping control of the funds you can avoid delays. Easy isn’t it?
What documents do the banks require?
Although you will not need financials such as tax returns, financial statements or notices of assessment, you will still need to show the bank an income declaration and the full details of your construction project.
Most banks will need the following construction specific documents:
- A copy of your building contract / construction tender
- A copy of the stamped council approved plans (or draft plans)
- Specifications / schedule of finishes
- Construction certificate (NSW) or building permit (VIC)
- Builder’s insurance
- Builder’s risk insurance / public risk insurance
Don’t worry it’s easier than it looks! Just provide us with your builder’s details and we’ll ask them to fax it all over to us.
We can help you apply for a low doc mortgage! Speak to us on 1300 889 743 or enquire online and our expert mortgage brokers will contact you to discuss your situation.
Can I still get low interest rates?
The good news is that with most lenders, you will not pay a higher interest rate for a construction loan, even if it is low doc. In most cases you will receive the same rate as if you were purchasing a property.
Three Golden Tips
Get your loan approved first
Do not begin construction of your property before obtaining a full approval. Obtaining finance for an incomplete security as a low doc loan is near impossible.
Currently no lender accepts a normal owner builder low doc loan unless you are a licensed builder yourself or have a very large deposit.
The exception to this is if you already own other properties. We have a select few lenders on our panel that will allow you to release equity from your other properties, which you can use for the construction of your home as an owner builder.
If you do not have enough equity in your properties you may need to go for a full doc loan.
Low doc and bad credit
If you have bad credit, obtaining finance for a low doc construction loan becomes almost impossible.
Luckily enough, we do have one lender on our panel that accepts bad credit low doc construction loans.
After buying a block of land for $350,000 a couple of years ago, John and his family couldn’t wait to start building their dream home in Nar Nar Goon, just an hour out of Melbourne.
John got some quotes, decided on a licensed builder, and worked out that he needed to borrow $420,000 to start constructing.
John ran his own graphic design business as a sole trader and earned a great income but he was knocked back for a construction loan when he applied with his bank. What was the problem?
He couldn’t provide his latest tax return and, on top of that, he had a $2,000 default on his personal credit card.
The default occured 4 years ago as a result of a dispute over pay with a client.
Until he could provide his most recent tax return and his credit card default cleared in a year’s time, it seemed as if John and his family would have to put off construction.
However, by going with a specialist lender, paying a slightly higher interest rate and coming up with a bigger deposit, John was able to borrow $420,000 at 75% LVR, with principle and interet repayments over 30 years.
What worked in John’s favour was that:
- He had a fixed price builder’s contract of $210,000 in place.
- He was able to provide a good reason for the default.
- He was able to provide an accountant’s letter and income declaration.
Specialist lenders work a little differently to standard banks, particularly when it comes to assessing applicants with a bad credit history.
They tend to take a more common sense approach to understanding an applicant’s situation rather than relying heavily on black and white lending policy.
It’s common for self-employed borrowers to be unable to provide up-to-date financials and many have one or two black marks on their credit file.
If you need help getting approved for a low doc construction loan, please call us on 1300 889 743 or fill in our free assessment form today.