What is a low doc home loan?
A Low doc home loan is a mortgage that borrowers can take out with less documentation than what is required for a standard home loan.
If you’re self-employed, freelancer, casually employed, contract worker, or someone who doesn’t tick the usual loan application boxes, a low doc loan option will help you buy your dream home.
Also referred to as alt doc home loans by a few lenders, it is the only way to borrow with less or alternative paperwork and financial documentation.
How much can I borrow?
- Borrow up to 90% of the property value with one of our lenders (higher interest rates apply).
- Borrow up to 80% of the property value with competitive interest rates (a risk fee may apply).
- Borrow up to 60% of the property value with standard home loans rates.
Will I get approved?
- You must provide alternative documents to prove your income.
- Most lenders require a 2 years ABN, but one of our lenders can accept a 1 day ABN.
- Some lenders can consider bad credit history.
What interest rates are available?
Competitive rates are available. Please contact us to learn more.
Lenders available:
Major lenders and non-bank lenders are available. Contact us to learn more.
Choosing a low doc loan
What do I need to look out for?
Low doc loans are a higher risk to financial institutions, so they tend to place more significant restrictions on this type of loan.
There are very few lenders that offer low doc solutions, while others have significantly increased the interest rates they are applying.
We’ve outlined a list of potential issues to look out for:
- Higher interest rates: This will mainly depend on the lender and the type of verification or supporting documentation you can provide. Some of our lenders offer the same low rates as they do for full documentation home loans.
- Larger deposit: 20% of the purchase price is typically required, although some lenders require less.
- LMI: Mortgage insurance is usually applicable if you borrow over 60% Loan-to-Value Ratio (LVR). Don’t get caught out by these potential restrictions.
Speak to one of our specialist mortgage brokers by calling 1800 771 900 or enquiring online.
How do I get approved for a low doc mortgage?
Getting approval for your loan isn’t as easy as it used to be.
We use the following three-step process to help you to find a lender:
- Find out which documents you can provide, what your needs are and which lenders you can qualify with.
- Select the lender with the lowest interest rate, fees and LMI premium, as well as the loan features that you require.
- Present your application in a way to make sure it is seen favourably by the lender.
Did you know that if you provide partial proof of your income (e.g. an old tax return) that some lenders are now required to ask you for full financial statements and tax returns for all entities?
Pro-tip: A lender cannot ignore a document he sees when completing their assessment. To avoid this issue, only provide the documents requested by the lender, nothing more!
Which low doc home loan lenders can help me?
Some low doc lenders are better than the others when it comes to your low doc applications.
- Alternative documents the lenders require to prove your income may vary.
- Looking at lower interest rates may not be wise as some lenders may include hidden charges.
- Take into consideration the application fee and LMI fee that lenders are offering. We recommend choosing a lender that allows you to refinance to a full doc loan once you have completed your tax returns.
Our experienced mortgage brokers can help you be sure of which low doc lender to go with. Please call us on 1800 771 900 to speak with one of our experts.
Low doc home loan requirements
What documents are required for a low doc loan?
For modern day low doc loans, you must provide supporting documents to verify the income that you have declared to the lender.
Each lender has their own requirements and will accept different document types to prove your income.
The main documents that can be used to verify your income are:
- 12 months’ BAS statements showing a high turnover.
- An accountant’s letter verifying your income (sometimes lenders might call the accountant to verify the letter).
- Business bank statements showing a high turnover.
- Interim financial statements.
Under the National Consumer Credit Protection Act (NCCP) Act, lenders require you to provide income verification before approving your mortgage.
If you can’t provide one of these documents then it is unlikely that you can get approval for a low doc loan. However, you may qualify for a no doc loan.
Please call us on 1800 771 900 or enquire online for more information.
Length of ABN / GST registration
Most lenders require you to have an ABN that has been GST registered for two years but this varies between lenders.
One of our lenders will accept someone who has had an ABN for just one day. This is usually for start-up businesses.
Reasonable income for age and occupation
Does the declared income make sense? For example, an 18-year-old apprentice would be declined if they declared an income of $200,000.
The banks are still required to meet responsible lending legislation so they will take a common sense approach to your declared occupation and income.
Asset to income ratio
Borrowers should have a good asset to income ratio. One of our lenders likes to see that you have a net asset position that is equal to two times your annual gross income.
For example, if you earn $100,000 a year, you would be expected to have around $200,000 in net assets.
This is a stringent policy for younger applicants and is a little lenient for older borrowers.
For this reason, we usually help young people to apply with a lender that does not have this policy.
Security property
Lenders prefer prime security properties in high demand locations like capital cities or regional centres. Many lenders do not accept properties that are unique, in disrepair or difficult to sell.
You can refer to our list of low doc property types for more information.
Total exposure
Most lenders prefer low doc borrowers with total debts under $1 million.
A few select lenders allow loans of up to $2.5m per borrower group (e.g. a husband and wife’s total borrowings together).
On a case by case basis, we can help investors borrow more than $2.5m with some of our lenders but they would need to have significant assets and borrow a low percentage of the property value.
Equity releases
Lenders normally require proof of how the loan funds will be used if any money is released directly to the borrower.
Lenders are concerned that the borrower may not actually have an income and is using the money to make the repayments or that equity is being released to be used as a deposit to buy further properties.
Refinances
Some lenders will not refinance an existing low document home loan or existing investment loan but will allow you to purchase a property with a low doc loan.
Refinances are known to be a higher risk than loans used to purchase a property.
Unfortunately, many people are caught out by this if they buy vacant land and then later refinance when they decide to build.
FAQs: Low Doc Loans
Yes, they are. Only difference is that the lending criterias have become stricter throughout the years.
Certain types of low doc loans are much more challenging to obtain than others including loans to refinance existing mortgages or home loans without BAS statements to back up declared income.
- What is a low doc loan?: Find out the basics of borrowing money without proving your income.
- No BAS low doc loans: Many lenders now require BAS statements to prove your income but there are lenders out there that don’t have this requirement! Find out which lenders can help.
- Home loans with no payslips: Many people have PAYG (pay as you go) jobs but cannot prove their income with payslips. There are alternatives to a standard loan that allow you to borrow without evidence of your income.
- Low doc refinance: Are you stuck on a high rate low doc loan? Although many lenders will not approve refinance, some are still willing to consider these applications.
- Low Doc Home Loan Calculator: Do you qualify for a low documentation home loan? This calculator will tell you!
You can get almost all of the standard home loan features with your low doc loan:
- Interest only.
- Extra repayments.
- 100% offset.
- Line of credit.
- Fixed interest rates.
- Split loans (multiple loan accounts).
The following are generally not available with a low doc mortgage:
- Third-party guarantees (e.g. parents guaranteeing your loan)
- Introductory interest rates
- Repayment holidays
- In some instances, security substitution
In most cases, you would need to lodge a new application so that the lender’s credit department could review your situation when a repayment break or new security property was required.
Low doc home loans are designed to assist those who have a deposit saved or have existing equity in a property but are self employed and have difficulty proving their income.
Low documentation lows could benefit the following:
- Business owners like sole traders, people in partnerships, or company owners who cannot provide full financials due to complications in their business structure.
- Businesses that have grown significantly in the most recent financial year compared to the previous financial year; hence, their current income evidence does not reflect their actual earnings.
- Professional investors, people with fluctuating incomes or people who have had a low income in the last financial year.
- Interim financial statements.
- Self employed, freelancers, or casual workers as minimal documentation is required to qualify for this type of loan.
To see if you will qualify with a lender for a low doc loan, try out our low doc home loan calculator, submit an online enquiry or call us on 1800 771 900 today!
Generally speaking, if you can provide up-to-date business income evidence, you should.
The reason is that it drastically increases your chances of approval and your opportunity to qualify for a much sharper interest rate than the rates usually applied to low doc mortgages.
The purpose of a low doc solution is to demonstrate your actual business earnings more accurately.
You cannot present misleading financial information for home loan approval purposes, and we will not assist you in doing so.
Lenders look particularly closely at your credit file and the repayment history of your debts because they cannot fully verify your income.
The major banks are far less forgiving of any problems with your credit history.
We do have options with some of our specialist lenders if you have a bad credit history.
Please enquire online or call us on 1800 771 900 to discuss your situation with one of our brokers.
You can refinance out of your current low loc loan when you owe less than 80% of the property value on your mortgage, you are outside of a fixed term and you can provide the following business financials:
- Two years personal tax returns.
- Two years personal tax assessment notices.
- Two years company/partnership/trust tax returns.
- Two years financial statements (if available).
Apply for a low doc home loan today!
Which lender has the lowest interest rates? Which has the lowest LMI premium for their low doc loans? Which lenders do you qualify with?
Our mortgage brokers specialise in low doc mortgages. They can quickly assess your situation and get back to you with the best options.
Please call us on 1800 771 900 or enquire online to go through your situation with an expert.