|Lease Doc Commercial Loans are designed for investors with rental producing commercial properties. The Lease Doc product is where servicing is established by income from a quality third party lease servicing the debt without the necessity to provide financials or tax returns or confirmation of other assets or other liabilities.
Lease Doc Loans are another type of commercial property loan that can be useful for self-employed borrowers in Australia. A Lease Doc Loan is designed for borrowers who have been self-employed for at least two years and have a proven track record of rental income. The loan is typically used to purchase commercial property that has a tenant already in place, providing a steady income stream.
To qualify for a Lease Doc Loan, borrowers need to provide the lender with evidence of the rental income, such as a lease agreement or rental statement. The lender will typically require the borrower to have a deposit of at least 20% of the purchase price of the property.
The interest rates for Lease Doc Loans are generally lower than Low Doc Loans, but higher than traditional commercial property loans.
One of the advantages of a Lease Doc Loan is that the lender takes the rental income into account when assessing the borrower’s ability to repay the loan, rather than just relying on the borrower’s personal income. This can make it easier for self-employed borrowers to qualify for the loan.
The majority of lease doc borrowers fall into one of these categories:
- Self funded retirees.
- People with a complex financial situation.
- Self employed borrowers with no income evidence.
Benefits of a Lease Doc Commercial Loan include:
- LVR’s up to 80%
- Loan Terms up to 25 years
- Interest only periods up to 5 years
- No annual reviews
- No payslips, tax returns or financial statements are required.
What do Lenders look for in assessing a Lease Doc Commercial Loan?
- The remaining term of the lease and strength of tenant
- Only multi use Commercial Investment Securities accepted (non specialised – retail, industrial, office or warehouse) within acceptable locations.
- Lenders want to see a true arm’s length transaction and confirmation that Lease is executed and a bond paid before formal Approval is Granted
- The interest cover ratio#
# The interest cover ratio is the number of times that the lease income will cover the loan repayments. Most lenders require 1.1x to 1.5x interest cover ratio. Assessment may include a buffer of up to 2% above the interest rate and depending on what costs are met by tenants, the lease income maybe reduced by 20%.