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Interest rates starting from | Documentation/eligibility requirements | Max loan amount | Max LVR | |
---|---|---|---|---|
St.George Bank | 5.94% variable (5.95% p.a comparison rate^) Max LVR 70% |
| Not specified | 70% |
ANZ | 6.19% p.a. Basic variable (6.19% p.a. comparison rate^) Max LVR 60% |
| Not specified | 95% |
Westpac | 6.09% p.a. variable 2-year intro rate (6.42% p.a comparison rate^) | ‘Fast Track’ application available if you:
| Not specified | 70% |
Commbank | 6.24% p.a. variable (6.62% p.a. comparison rate^) on Wealth Package Home Loan |
| Not specified | 60% |
NAB | 6.59% p.a. variable (6.63% p.a. comparison rate^) Basic Variable Home Loan |
| Not specified | 95% |
Pepper Money | 6.49% p.a. variable (6.67% p.a. comparison rate^) for LVRs up to 65% – higher rates apply for higher LVRs |
| $2.5m | 95% |
Bluestone | 6.94% p.a. variable (7.00% p.a. comparison rate^) |
| $3m | 90% |
ORDE Financial (apply through broker only) | 6.94% p.a. (7.02% p.a. comparison rate^) |
| $2m | 80% |
Resimac | 6.99% p.a. variable (7.02% p.a. comparison rate^) Resimac Prime Alt Doc 70% max LVR | Choice of income verification options, such as:
| $2m (70% max LVR) $1.5m (80% max LVR) | 80% |
Reduce Home Loans | 6.99% p.a. variable (7.06% p.a. comparison rate^) on Capitalizer Home Loan) (max LVR 70%) |
| $1m or up to $1.75m with a higher interest rate (+0.30%) and lower max LVR (65%) | 80% (higher interest rate applies) |
La Trobe Financial | 7.34% p.a. variable (7.61%* p.a. comparison rate^) Self-Employed Lite Doc Loan |
| $25m (70% LVR); $5m (75% LVR); $2m (80% LVR) | 80% |
Liberty Financial | 7.39% p.a. variable (7.66% p.a. comparison rate^) |
| $2m | 85% |
Axis Lending | Rates not advertised |
| $2m | 80% |
Connective Home Loans | Rates not advertised |
| $2m | 65% (quick doc); 70% (mid doc) |
MA Money | Rates not advertised |
| $2m (MA Money Near Prime) | 80% (MA Money Near Prime) |
Red Rock | Rates not advertised |
| No maximum advertised | 80% |
Red Zed | Rates not advertised | Borrowers require:
| $1.75m | 85% |
Resi | Rates not advertised |
| $2m (prime alt doc) | 95% |
Vast Capital | Rates not advertised |
| $5m (for VE Residential Alt Doc Variable Product) | 95% (for VE Residential Alt Doc Variable Product) |
Low doc (or low documentation) home loans don’t require the standard proof of income and employment that regular home loans do. They are designed for self-employed individuals, contractors, business owners, and other ABN holders who don’t earn a fixed salary.
Low doc loans offer a solution in cases where the borrower cannot provide payslips, tax returns or employment contracts to prove they can afford a home loan.
While low doc loans can be suitable for certain borrowers, there are drawbacks including higher rates interest and fees. This is on account of the higher level of risk for the lender when offering a low doc home loan.
In other ways, low doc home loans are the same as any other loan. For example, there are:
The terms 'low doc', 'alt doc' and 'no doc' are sometimes used interchangeably, but they generally refer to different document requirements when applying for a home loan:
According to Money.com.au’s home loans expert, Mansour Soltani, the less documentation you provide with your application, the more your loan will cost.
“There's a product out there for every need. Every borrower will be in a different scenario in terms of what they can and can’t show the lender, and there are some low doc lenders who will ask you for next to no documentation. But they'll charge you for the privilege.”
Mansour Soltani, Money.com.au's home loan expert
Low doc home loans are designed for ABN holders who are registered for GST. Some lenders require a minimum trading duration, e.g. 6-12 months.
Here are some examples of borrowers who commonly seek out low doc home loans.
Particularly for borrowers who have only recently become self-employed, chances are a low doc loan will be required. Some lenders are more likely to accept an applicant if they have previously been a PAYG employee in the same industry.
It’s common for businesses to have volatile income and profit levels, making it difficult for the owner to demonstrate a reliable income to a lender. For example, if revenue was lower than usual in the past 12 months (or expenditure was higher than usual), a business owner may need to prove they can afford a home loan through other means.
“Some low doc lenders don't check your credit rating,” Mansour explains. “They look at other things, such as whether your accountant is willing to sign off on your loan through an accounts declaration.”
For this reason, a low doc application is a common option for those seeking a bad credit home loan (aka, ‘near prime’ loan).
The following low doc borrower examples are based on Mansour’s clients who required assistance with their application.
"A client of mine who runs a funeral parlour just bought another site for his business and he spent $300,000 renovating it. This hammered his borrowing capacity when applying for a home loan.
"If you're a business owner and you've had a lot of capital expenditure that year, a low doc loan can be worth looking at. It means you have flexibility over how you can demonstrate that you can afford the loan. What your business was doing in any given year becomes less of a determining factor."
"For some borrowers I work with, a reason why they don't want to show documentation to the lender is they've been minimising their income to reduce their tax bill.
"So their accountant’s been really creative with their accounting and pushed their income right down.
"The problem is when you then go to the bank and you say 'here's my income tax return', they’ll say that’s not enough for us to give you the loan you want.
"In that case, a low doc loan means the borrower might not need to show tax returns. Instead their accountant can sign a document stating they can afford the loan."
Low doc home loan | Standard home loan | |
---|---|---|
Income requirements | Flexible (fewer) income verification requirements. | Full documentation required to prove your income. |
Maximum loan-to-value ratio (LVR) | Usually up to 85% but varies by lender. | Usually 95% (with lender’s mortgage insurance). |
Interest rates | Depends on the application but generally high compared to standard loans. | Lower than low doc rates but vary based on the LVR and other factors. |
Fees | Usually higher than standard loans. Additional ‘risk fees’ may apply based on a percentage of the loan amount. | Standard home loan fees apply. |
Application | Some lenders only allow applications through a mortgage broker. | You can usually apply directly with a lender or through a broker. |
This step isn’t always necessary with a standard home loan, but almost always is with a low doc application. This will allow your lender or your broker to understand your situation and, based on that, which loans you’re likely to be eligible for. At this stage they will also let you know what documentation you will be able to apply with.
This will include information about yourself (plus any joint applicants), your business, assets you own, other debts and dependents you have, plus details about the loan you’re applying for (e.g. loan amount and duration).
You’ll also need to submit any documents you discussed with the home loan specialist or your broker. This often means speaking to your accountant to request documents or signed declarations.
As a final step in the application process, the lender will arrange a valuation of the property you’re buying to ensure its value is high enough relative to the loan amount. You’ll also need to provide a contract of sale for the property. If the lender is satisfied, your loan will be approved and the funds released to the seller (a process known as settlement).
The documents you’ll need to submit will vary based on the lender and your situation. The time frame covered by the documents can also range from 6 months - 2 years or longer.
Generally speaking, lenders may accept the following documents (or a combination of them) as proof of eligibility:
Plus…
“I'm helping a client at the moment where he's going to sign an income declaration and his accountant is going to sign a declaration. The lender views that as two income verifications, but will charge a risk fee and a high interest rate. If you want a lower risk premium, you'll need to provide more verification, such as bank statements showing how much money is going into the account. Basically you can choose how much documentation you want to hand over – just remember the lender will choose an interest rate to match.”
Mansour Soltani, Money.com.au's home loan expert
Low doc home loans are usually available with all the same features that regular loans have. And given rates and fees are usually higher on low doc loans, getting a loan with features that can minimise interest costs is usually a priority for borrowers.
Repayment flexibility: Many contractors, business owners and self-employed people have irregular income, sometimes with large one-off payments coming in at once. Having the flexibility to put these lump-sum payments towards your mortgage (without penalty fees applying) could help you pay it off quicker and reduce the amount of interest you pay.
Redraw facility: A redraw facility allows you to access any extra repayments you’ve made on your home loan if you need cash.
Offset account: A low doc home loan with an offset account reduces the amount of interest charged on the loan by linking a savings or transaction account to the loan. Interest is calculated on the loan by deducting your offset account balance from your home loan balance. If you’ve got savings or other cash sitting on the sidelines, an offset account could save you thousands of dollars over the life of the loan.
Lear more about how a home loan offset account and redraw facility differ.
Because low doc home loans are considered risky by lenders, they often have a lower maximum LVR of 60%. In other words, low doc borrowers may require a deposit of at least 40%.
Some lenders will allow an LVR of up to 90% or even 95% if you can prove that your income can service the mortgage but you will usually have to pay lender’s mortgage insurance (LMI) if your LVR is above 80%.
LMI is a one-off cost charged by your lender to protect them against losses in the event that you can’t make mortgage repayments. It can cost several thousand dollars and can usually be rolled into your mortgage so that you don’t have to pay it upfront.
Yes, there are low doc home loan options available from some specialist lenders for borrowers with bad credit (near prime). These loans are generally more expensive than prime loans.
Low doc home loan interest rates are usually higher than regular home loan interest rates because lenders view low doc borrowers as being higher risk. However, if you have a deposit of 40% or more you may be able to secure interest rates that are comparable to those of standard home loans.
Each of Australia’s big four bank, as well as a range of specialist non-bank lenders in Australia offer low doc home loans for self employed business owners:
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