Low Documentation - Low Doc Loans
A Low Doc loan is riskier than a Full Doc loan and therefore incurs a slightly higher interest rate. In remote areas of Australia Low Doc loans are often not available.
The requirements of a Low Doc loan are similar to a Full Doc loan with a couple of exceptions which arise out of the fact that the burden of written proof of the income earned is not required.
- The maximum that can be borrowed is 80% of the value of the property.
- As the loan is not insured there will be no mortgage insurance.
- The borrower has had to be self employed and held an Australian Business Number (ABN) for a minimum of two years.
- A declaration is signed by all of the applicants stating their income and that they can make the repayments without hardship.
Low doc home loans
Low doc loans are designed to assist people who do not qualify for a traditional home loan to buy a property. Low doc (or low documentation) loans still require the application to be made in writing, however you may not be required to provide much of the paperwork that is necessary with standard home loans, such as proof of income, assets or liabilities. The low doc loan relies more on a method called self-verification, where you state your income without the verifying documentation.
Who can benefit from a low doc loan?
Low doc loans are designed to benefit those people who have some existing equity or a deposit saved, and have trouble showing evidence of regular income. This could apply to the self-employed or casual workers. Low doc loans could also be made available to people with a bad credit history.
Why should I take out a low doc loan?
If you fall into any of the categories above and wish to purchase a property, a low doc loan could be your only option for obtaining the required finance.
Most low doc loans will cover up to 80% of the value of the property (80% LVR), although the more financial documentation you can present to the lender, the higher the percentage could be.
Types of low doc loans
There are three main types of low doc loans: self-declared income, account statement and asset lend. Each of these low doc loans have slightly different eligibility requirements.
Self declared income
The most common low doc loan, where the lender will offer a home loan on a signed declaration of income, with no accompanying evidence. In general, 80% of the property value is loaned and the interest rate can be higher than a standard loan
Account statement
Requires more substantial income evidence, such as a letter from your accountant, however interest rates are usually more in line with a standard home loan .
Asset lend
This type of low doc loan requires the least evidence to be presented, in some cases no proof of income or signed declaration is needed. The loan is secured purely on the value of the property. These loans have substantially higher interest rates and, in general, a lower percentage of the value of the property can be borrowed.
