Low Doc Home Loans
Low-doc home loans in Australia require less documentation than traditional mortgages and are intended for self-employed or small business owners who may not have typical income documentation. Instead of extensive paperwork, borrowers typically only need to show a tax return or accountant’s statement to prove income. However, these loans usually have higher interest rates and stricter requirements. It’s important to compare different loan options and consult with a mortgage broker or lender to find the best fit for you. Got a bad credit history? Worried about high-interest rates? We are here to help. We offer low doc home loans at low interest rates all across Australia.
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Low Doc Home Loan
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Low Doc Home Loans are a type of loan that require less documentation compared to traditional mortgages.
Table of Contents
- What is a Low Doc Home Loan?
- How do low doc home loans work in Australia?
- Requirements and How to Apply?
- Advantages of Low Doc Home Loan
- Disadvantages of Low Doc Home Loan
- Case Study: Low Doc Home Loan in Melbourne
- Case Study: Low Doc House Finance for a SMB in Victoria
- Frequently Asked Questions (FAQs)
What is a Low Doc Home Loan?
Low Doc Home Loans, as the name suggests, require minimal documentation compared to traditional home loans. These Low Doc Home Loans, also known as alternative-doc loans, can be obtained without submitting the same paperwork as a traditional full-doc loan. Instead, alternative forms of documentation are used to qualify for the loan.
How do low doc home loans work in Australia?
Self-employed individuals in Australia may face challenges in qualifying for a home loan with a bank, as they may not have their finances in order when applying. This can make it difficult to meet the requirements for Low Doc Home Loans, which are designed for self-employed individuals and small business owners. Unlike salaried employees who typically need only two payslips to demonstrate income, self-employed individuals may need to produce two years of financial statements for both business and personal transactions. To apply for a low-doc home loan, self-employed individuals may need to provide a proof of income certificate from an accountant, business bank statements, BAS statements, or other relevant documents. Although tax returns and financial statements are not always required for Low Doc Home Loans for the self-employed, lenders will still need to see proof that the borrower can repay the loan without difficulty.
Requirements and How to Apply?
Lenders may have their own policies and criteria for assessing an applicant’s eligibility. Some of the standard criteria include:
- Length of ABN/GST registration: Most lenders require an ABN that is registered for a minimum of 12 months, although some may accept an ABN that is six months old. It’s also required to be GST registered if the sales exceed $70,000.
- LVR: The maximum LVR is typically 85%, but some lenders may approve a higher LVR of 95% in exceptional cases.
- Moderate income reported for the company: Lenders will assess if the income and assets are compatible with the business and the applicant’s age. For example, an 18-year-old courier with no assets would likely be rejected if they declared earnings of $250,000.
- Clean credit rating: A clean credit rating is generally required for the best Low Doc Home Loans rate. Lenders may consider loans of up to 85% of the credit impairments allowed for applicants with lower credit ratings.
- Secure property: Private lenders may be willing to take on the applicant’s risk, but not the property. Properties outside metropolitan and regional areas that are unique and sometimes require significant repairs, eroding, and complex selling may not be eligible.
- Cash out: Some expert lenders may allow cash withdrawals of up to 85% of LVR.
- Debt consolidation: Expert lenders may allow debt consolidation up as high as 85% of LVR.
When it comes to documentation, Low Doc Home Loans may require different documentation than traditional mortgages. Some of the common documentation required for low-doc home loans include:
- Six to twelve months lodged BAS statements, where the lender uses a formula of 40-60% of sales as income.
- A letter from an accountant confirming the applicant’s earnings.
- Three to twelve months’ worth of business bank statements.
- Old (over 24 months) tax returns and current financial statements may also be required.
It’s important to note that different lenders may have different documentation requirements, so it’s important to check with the lender for their specific policies.
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Advantages of Low Doc Home Loan
Low-doc home loans offer several benefits for those looking to purchase a home:
- Convenience: If you’re willing to pay the additional costs associated with low-doc home loans, it can help speed up the home-buying process.
- Less paperwork: The process of purchasing a home typically requires several applications and forms, many of which are related to your debts and income. With a low-doc home loan, you can eliminate many of these documents.
- Different loan options: Most lenders offer a variety of low-doc home loan options, including fixed-rate and variable loans. This is important for those who are paying more than conventional loans.
Low-doc home loans may come with some additional challenges for borrowers, including:
- Higher deposit requirements: Borrowers may be required to pay a larger deposit for a low-doc home loan as they are considered high risk by lenders. This can be a significant amount of funds to put aside, particularly if you have a fluctuating income.
- Higher interest rates: The interest rate on a low-doc home loan is generally higher than traditional loans. This is due to the higher risk associated with these types of loans. This is something to consider, especially if you have a fluctuating income and your interest rate is not fixed.
- Additional fees: Some home loan lenders may charge additional fees for their low-doc home loans. These fees could be related to applications and other processing charges. These added costs may be another expense for those who take out this type of loan.
Case Study: Low Doc Home Loans in Melbourne
A client in Melbourne, who had difficulty providing business records, had his home loan application denied by a well-known bank. He reached out to us for assistance and our specialist team was able to quickly assess his situation and arrange for his approval the same day. Within 72 hours, the client received the funds for his low-doc home loan credited into his account.
Case Study: Low Doc House Finance for a SMB in Victoria
One of our customers, Mr. Clark, who runs a carwash business in Victoria, had a bad credit history and was denied a home loan by a bank. He reached out to BFL and applied online. Our team connected him with one of our private lenders from a pool of lenders who offered Low Doc Home Loans and he accepted it within 72 hours. The funds were transferred into his nominated account, and he is now a satisfied customer.
Frequently Asked Questions (FAQs)
What is a Low Doc Home Loan?
A low-doc home loan is a type of financing option where you do not have to provide the typical documentation required for a traditional home loan.
How much can I borrow?
Low Doc Home Loans for self-employed individuals typically have the following borrowing limits:
- $1,000,000 with a maximum LVR of 85% of the property value
- $2,000,000 with a maximum LVR of 80% of the property value
- $2,000,000 with a maximum LVR of 65% of the property value
It’s important to note that High LVRs of up to 85% are typically only available in high-population areas. In exceptional cases, some lenders may approve an LVR of 95% for low-doc home loans.
What is the minimum documentation and deposit required for a low-doc home loan?
Can I get a Low Doc home loan from the government of Australia?
Low Doc Home Loans are not offered by banks or the government, they are only available through private lenders. If you are interested in a low-doc home loan, contact us now to schedule a free evaluation.
How is my bad credit history taken into account when applying for a low-doc home loan?
When assessing a loan application, we take a holistic approach and consider the entire picture. Even if you have poor credit history, we offer Low Doc Home Loans in Australia as a solution for homeowners facing credit challenges.
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