Low Doc Home Loans
Low Doc Loans
A low doc loan is a mortgage that requires less documentation than standard Gold Coast 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 low doc lenders.
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What is a Low Doc Loan?
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.
How do low doc loans differ from a standard home loan?
Low doc loans are essentially home loans for self employed. They differ from standard home loans in several ways. The main difference is that low doc loans require less documentation to prove your income and financial position compared to standard home loans.
With a standard home loan, lenders usually require proof of income and financial standing, such as payslips, tax returns, bank statements, and other financial documents. In contrast, low doc loans are designed for self-employed borrowers who may not have all the necessary documentation to prove their income and financial position. Instead of providing the usual documentation, self-employed borrowers can provide alternative documentation such as bank statements or an accountant’s declaration.
Due to the lower documentation requirements, low doc loan interest rates are usually higher, as well as its fees. Low doc loans also have more stringent lending criteria than standard home loans. They may also require a larger deposit, with lenders often requiring a minimum of 20% deposit for low doc loans.
Who is eligible for a low doc home loan?
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Low doc loans can also be used in cases where tax returns are not yet completed or are out of date.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.
How much can I borrow?
Depending on the lender, low doc home loans may come with a higher interest rate compared to standard home loans. This is because they are considered higher risk due to the reduced documentation requirements.
Some lenders may impose restrictions on the postcodes where you can purchase a property using a low doc loan.
If your loan amount exceeds 60% of the property’s value, you may be required to comply with risk fees.
Will I get approved for a low doc loan?
Lenders will still ask for some proof of income, although not as many compared to regular home loans Gold Coast. Here’s what low doc lenders typically ask of you when you apply for a lowdoc loan:
Most common reasons that lenders decline low doc loans:
Choosing the low doc loan that suits your needs
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:
How can I get approved for a mortgage with a low doc?
Finding approval for your loan isn’t as easy as it was in the past. This three-step process is how we as your trusted mortgage broker will use to assist you in finding a low doc lender:
1. Identify what you need the loan for, collect which documents are available to you, and find which lenders are able to help you.
2. Select the lender offering the lowest interest rate, fees and LMI premium and loan features that are most important to you.
3. Make sure to present your application in a manner that is favourable to the lender.
Lenders concentrate only on the documents that you provide to complete their assessment of your loan application. To avoid diverting to an unfavourable decision, only provide the documents that they ask of you and nothing else. They can always ask for further documentation later if they need it for their application process.
Which low doc loan lenders could I trust?
Certain low doc lenders might be better than others for your personal lowdoc home loan needs.
We work hard to recommend a lender which allows you to refinance your loan to a full doc loan after you have completed all of your tax returns. Get matched with the right low doc lender by our highly experienced mortgage brokers.
What are the requirements for a low doc home loan?
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 low doc loan 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:
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.
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.
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.
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.
Can I get a low doc home loan for an investment property?
Yes, it is possible to get a low doc home loan for an investment property. However, the eligibility criteria and requirements may differ from those for a standard home loan, and the interest rates and fees may also be higher.
As with any home loan application, it is important to discuss your options with a mortgage broker and choose a loan that suits your financial situation and investment goals. Carefully consider the risks involved with investing in property and seek professional advice if necessary.
Can I use a low doc home loan to refinance an existing mortgage?
Yes, it is possible to use a low doc home loan to refinance an existing mortgage, subject to certain criteria. Borrowers can refinance up to 80% of the value of their property, provided their credit history is clear, and they have made their payments on time for the last 6 months.
They must also have an ABN and provide either BAS, an accountant’s letter, or business bank statements to verify their income. Borrowing money for business, investment, or personal purposes is accepted.
Other factors that may influence the application include GST registration, credit scoring, industry, location, and size of the security property, and type of loan being refinanced. A mortgage broker specialising in low doc loans such as myself can assist in finding the best possible solution for refinancing.
Are low doc home loans available for construction or renovation projects?
Yes. Construction loans under low doc policy are accepted like normal construction loans. They are basically a low doc loan used for construction purposes.The facility for a low doc construction loan is being assessed and approved with little income paperwork.
The maximum LVR (loan-to-value ratio) you can get for a low doc construction loan is 80% LVR. Most lenders will lend up to 80% LVR for a low doc construction loan, with some lenders only considering loans under 60% LVR.
You could get a low doc construction loan using all types of low doc assessment methods, including low doc with no BAS, low doc with BAS, low doc with accountant’s letter, trading accounts low doc, and income declaration low doc.
The lenders who approve construction low doc loans require a signed builder’s contract together with the relevant council approved plans for the proposed construction. Most lenders will do a low doc construction loan using a variable rate loan, while a small number of lenders will offer other loan products, such as a standard variable loan, basic loan, fixed rate home loan, offset home loan, or interest-only loan.
The interest rate for a construction low doc loan can be the same as a normal full doc loan depending on the lender that is used, and there are some lenders who charge a slightly higher rate in some cases.
What happens if I default on a low doc home loan?
If you default on a low doc home loan, you may face various consequences. Once you fall behind on your repayments, your lender may send you a default notice, giving you 30 days to make the outstanding payments, including regular repayments owed. If you fail to pay the overdue amount within the given deadline, the lender may repossess your property and sell it to recover the debt.
Unfortunately, this could lead to losing the roof over your head.
Missing a mortgage payment can also result in fees, which can cost as much as $200, depending on the lender. To add insult to the injury, the interest on your loan can increase as you have to make up lost payments over time.
Your credit report may also show a mortgage default, which can negatively impact your credit rating and significantly hamper your lending capabilities in the future should you choose to access another form of finance.
What steps can I take when I default on my low doc home loan?
1. Reduce your repayments to the minimum amount or change the payment frequency by contacting your lender.
2. If your mortgage has an offset account or a redraw facility, you may be able to use excess funds to cover repayments.
3. You can restructure your mortgage by moving from a variable to a fixed rate, switching to a split variable/fixed rate, or staying with a principal-and-interest loan.
4. If your lender is not willing to work with you, you can consider refinancing with a different lender to find a more competitive interest rate and better COVID-19 packages.
5. Downsizing to a more affordable home can be a difficult decision, but it may free up extra money each month thanks to lower repayments.
If you default on your low doc home loan, your lender may take legal action against you, so it’s essential to work with your lender as soon as possible. You can seek advice from financial hardship teams or free financial information services to help you understand your rights and options.
You can reach out to the National Debt Helpline at 1800 007 007 for free financial counselling.
Why use a mortgage broker for a low doc home loan?
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.
If I work with you, can you guarantee that you will give me access to the best low doc home loans?
As a mortgage broker, I cannot guarantee that I will give you access to the “best” low doc home loans on the market. This is because claiming that a particular low document home loan is the “best” is not allowed by ASIC regulations.
As mortgage brokers, our job is to help you find a home loan that is most suitable for your specific needs and circumstances. We assess your financial situation, discuss your goals and preferences, and recommend a range of lending solutions from our panel of lenders. Ultimately, the right home loan for you is the one that meets your needs and fits your budget. So, while we cannot guarantee that we will give you access to the best low doc home loans, we can certainly work with you to find the most suitable loan option for you.
Our lines (and doors) are always open to serve individuals like you who may be wondering if low doc loans are their best option. Get in touch with Professional Lending Solutions by booking your preferred time or by calling us at 07 5597 6049.