KEY TAKEAWAYS: A low doc loan is a mortgage that requires less documentation than standard home loans and can best suit self-employed individuals. Working closely with a professional mortgage broker ensures your documents are right to go before making an application and that you get access to the right lenders.
A low doc home loan is a mortgage that requires less documentation than standard home loans.
This loan option can help you buy your dream property if you are self-employed, freelancer or casually employed or someone who doesn’t meet the requirements for standard home loan applications.
This type of home loan is ideal for borrowers who have both assets and income and are not able to provide the usual paperwork, such as tax returns.
Low doc loans can also be used in cases where tax returns are not yet completed or are out of date. In these situations, alternative documentation (such as BAS statements), is required to better reflect current conditions.
Low doc home loans can be applied for by self-employed individuals, freelancers and investors who do not have a regular job paying PAYG taxes.
A low doc loan allows for a lot of flexibility. A low doc loan is ideal for contractors, freelancers, and consultants.
Not sure yet if you are eligible for a low doc loan? Professional Lending Solutions can help you discover if you qualify for one. Get in touch with us to find out if a low doc loan is right for you.
With our lenders, you can:
Lenders will still ask for some proof of income, although not as many compared to regular home loans. Here’s what lenders typically ask of you when you apply for a low doc loan:
Most common reasons that lenders decline low doc loans:
Income is not high enough or lacks sufficient documentation to cover the loan.
A poor credit history.
Failure to pass the lender’s credit score.
Where the security property is located.
A property that is not suited for a low doc loan.
What should I look out for when looking for a low doc loan?
As low doc loans carry a higher risk for financial institutions, they will place greater restrictions on this type of home loan.
Here are some factors for you to be aware of when considering a low doc loan:
Be guided with these restrictions by speaking to one of our expert mortgage brokers. Call our experts mortgage brokers in low doc loans on 07 5597 6049 today.
What documents do you need to obtain a low doc loan for your home?
To be eligible for a low doc loan, you will need to supply supporting documents to prove your income. Each lender has its own requirements and will accept different types of documentation to prove your income.
In general, these are the following documents that can be used as proof of income:
12 months of BAS statements with a high turnover.
An accountant’s letter stating that they have verified your income. Lenders may sometimes call the accountant to confirm the details on the letter.
Business bank statements that show high turnover.
Interim financial statements.
The National Consumer Credit Protection Act requires that lenders verify income before they can approve your mortgage.
If you are not able to provide any of these documents, it may be likely that the lender will reject your application. If you are in this position, please reach out to us for a FREE chat and we can advise you of your options.
Length for ABN / GST registration
Most lenders require an ABN that has been GST registered for two years. However, this can vary from lender to lender.
We have ensured to include in our panel of lenders one who will accept someone with an ABN even for one day. This option is most often used for start-up businesses.
Age- and occupation-related income
Lenders will decide if your declared income makes sense. For example, for an 18-year-old apprentice to declare an income of $200,000 is significantly higher than the median, increasing its chances for an application to be questioned or declined.
Your income and occupation are subject to the banks’ responsibility to uphold lending laws.
The ratio between assets and income
Borrowers need to have a good income-to-asset ratio. A net asset position that is two times your annual gross earnings is a ratio that lenders prefer.
For instance, if you earn $100,000 annually, you are expected to have $200,000 worth of net assets.
This policy is more stringent for younger applicants than it is for older borrowers. Because of this, we help young people to apply for a loan with a lender who does not have this policy.
Security property
Lenders prefer prime security properties that are located in high-demand areas like major cities and regional centres. Some lenders won’t take properties that they deem are unusual, difficult to sell, or in disrepair.
Total exposure
Lenders will prefer and classify borrowers with lower total debts than $1,000,000 to be low doc.
A few lenders are willing to lend up to $2.5m per borrower group. (A group is classified as the maximum combined total borrowings of married partners, for example).
Our lenders can assist investors in borrowing more than $2.5m. But you need to have substantial assets and only borrow a small portion of the property’s worth.
Equity releases
Lenders require documentation to prove how funds are being used if money is sent directly to the borrower.
Lenders may be concerned that the borrower doesn’t have an income and might believe that the borrower is using the money to pay the interest of other loans or to put down a deposit for further property purchases.
Refinances
Some lenders may not refinance low document home loans and investment loans but allow you to purchase property with a low documentation loan.
Mortgages that are refinanced have been shown to be riskier than loans used to purchase a property. This can lead to many people being caught unaware if they buy vacant land, then refinance later when they build.
We specialise in low doc mortgage loans and can assess your needs and match you with the right lender. Enquire online to talk to one of our expert mortgage brokers.
With the vast number of lenders and varied offers out there, it is crucial that you speak with an expert in low doc home loans to get matched with the right lender and to find the best deal for you. Low doc loans now offer professional packages and basic loan discounts, much like full doc loans, and navigating all your options could overwhelm you, or worse, derail your chances of getting approved.
There are also significant differences between lenders when it comes to LMI premiums and application fees. Although this information is not publicly available to lenders, we as mortgage brokers are aware of it.
Our lines (and doors) are always open to serve individuals like you who may be wondering if a low doc loan is their best option. Get in touch with Professional Lending Solutions by booking your preferred time or by calling us at 07 5597 6049.
