Quick Guide to Low Doc Home Loans
Primarily aimed toward self-employed borrowers, low doc home loans are unique from Prime Home Loans, as they require less documentation to prove income.
Generally when you’re applying for a mortgage, the lender will want to confirm income by confirming this with your last two years of tax returns for both your business and personal returns and thus your capacity to repay the loan. However low-doc loans don’t require these income documents to confirm borrowing capacity. For this reason they’re ideal for contractors, self-employed applicants and people who have fluctuating income streams, as you don’t need to provide evidence to prove your income.
These low doc home loan funders will accept other forms of proof of income such as:
- Last two lodged BAS statements from ATO portal
- 6 months of Business Bank statements
- Letter from Accountant confirming income and profits
Essentially, these loans cater to those applicants that don’t meet the quality lending criteria of a full-doc loan. As a result low-doc loans have allowed thousands of Australians who, for varying reasons, are denied a typical mortgage, to realize access to credit. Unlike no-doc loans – which require no paperwork and are therefore deemed to be very risky by lenders – low-doc loans aren’t usually attached to substantially higher interest rates. Many of the low-doc loans on the market provide free or low-cost access to extra features like offset accounts, redraw facilities, interest only options and also the ability to make extra re-payments.
You will need to have a higher deposit compared to prime loans as low doc home loans are available for borrowers seeking up to 85% of the LVR. Some Funders charge a risk fee which can be between 1 > 2% and interest rates generally start at 1% > 2% above prime loans with Bad Credit Options at higher rates depending on credit impairment.
Therefore, it pays to do your research, and if possible seek the recommendation of a professional, experienced mortgage broker such as Low Doc Mortgages before you make any decisions.