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Low Doc Loans

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Updated: 30 Nov, 2024
5 mins read

What Are Low-Doc Home Loans?

What Is A Fixed-Rate Home Loan?

Low doc loans carry a higher risk for financial institutions, leading to stricter requirements and conditions for these types of loans.

Only a few lenders offer low doc solutions, and many have substantially raised the interest rates associated with these loans.

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 0862430351 or complete our free online assessment form.

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!

What Are Low-Doc Home Loans?

Low-doc home loans offer flexible terms designed for non-traditional borrowers. They are especially beneficial for self-employed individuals or business owners who may find it challenging to provide standard income verification documents.

Here are some key features and conditions:

Flexible income verification: Instead of traditional payslips and tax returns, lenders typically accept alternative documents like business activity statements (BAS), bank statements, and accountant letters.
Higher interest rates: Due to the perceived higher risk, low-doc loans often have higher interest rates than standard home loans.
Lower Loan-to-Value Ratio (LVR): Lenders might impose a lower LVR for low-doc loans, requiring a larger deposit.
Limited loan features: Some features, such as offset accounts, redraw facilities, and fixed interest rates, might be restricted or unavailable.
Additional fees: Some lenders may charge higher fees for low-doc loans.

Eligibility Criteria For Low-Doc Home Loans

To qualify for a low-doc home loan, borrowers still usually need to demonstrate a steady income, albeit with less documentation than traditional loans require. The typical requirements for low-doc home loans are:

Generally, the borrower must be self-employed in the same industry for at least a year.

  • We have lenders on our panel that consider self-employment for at least six months if there is prior employment in the same industry for at least 12 months.
  • More competitive products may require the borrower to be self-employed for at least 24 months.

Your ABN must be active or GST registered for at least six months, though some lenders will accept only a minimum of one year or two years.
Alternatives to traditional income verification, such as BAS, business bank statements, and accountant letters, are generally accepted.
Lenders require 6-12 months of BAS.
For low-doc refinancing, borrowers will need a credit file without dishonours or arrears in the last three months to be considered.

Different lenders have varying policies. The maximum LVR without LMI is determined case by case, depending on the strength of the application.

What Documents Do I Need To Provide?

You must provide supporting documents to verify your declared income. Each lender has specific requirements and will accept different document types to prove your income.

The main documents that can be used to verify your income are:

6- to 12-month BAS statement showing a high turnover.
An accountant letter verifying your income (sometimes lenders might call the accountant to verify the letter).
Business bank statements showing a high turnover.
Interim financial statements.

We have a lender that can consider low-doc applications based solely on interim financial statements, depending on the overall strength of your application.

Verification of ABN registration.

Under the National Consumer Credit Protection Act (NCCP) Act, lenders require you to provide income verification before approving your home loan.

Before applying, it’s advisable to let an experienced mortgage broker review your case and documents to ensure a smooth application process.

Please call us on 0862430351 or enquire online, for free, for more information.

Who Should Consider Applying For A Low-Doc Loan And Why?

Self-Employed Individuals: Those who run their own businesses often do not have the standard documentation traditional lenders require, such as 1-2 years of tax returns. Low-doc loans allow them to provide alternative income verification, making homeownership more accessible.
Freelancers and Contractors: Individuals with fluctuating incomes or those who work on short-term contracts may find it difficult to provide consistent income documentation. Low-doc loans offer a way to secure financing without the need for extensive paperwork.
Investors: Property investors who rely on rental income or have multiple income streams may benefit from low-doc loans, as these loans can accommodate various forms of income verification.

Pros and Cons of Low-Doc Home Loans

The pros of low-doc home loans are:

Accessibility for self-employed and non-traditional earners
Flexible documentation requirements
Potentially faster approval process

The cons of low-doc home loans are:

Higher interest rates than full-documentation loans
May require a larger deposit (typically 20%)
Limited lender options
Lenders Mortgage Insurance is usually required if you borrow at over 70% LVR

Get Professional Assistance in Securing a Low-Doc Home Loan

Make Informed Decisions With The 360° Home Loan Assessor

Determine how much you can contribute as a deposit.
Get clarity on the total costs of buying a home.
Explore interest-rate options based on your situation.

FAQs

Do Low-Doc Loans Have Higher Interest Rates?

Yes, low-doc loans generally have higher interest rates than full-doc loans. This is due to the increased risk for lenders with less documentation.

While similar, alt-doc and low-doc are not identical. Alt-doc loans offer more flexibility in what documents a lender accepts, while low-doc primarily focuses on minimal income verification.

The primary difference between low-doc and full-doc loans lies in the amount of financial documentation required.

Full-doc home loans require extensive financial documentation, such as two years of tax returns and Notices of Assessment. They typically offer lower interest rates due to reduced lender risk.
Low-doc home loans demand less paperwork, making them suitable for self-employed individuals with fluctuating income or incomplete financial records. Required documents typically include an ABN, BAS statements, and quarterly bank records; however, this flexibility often comes with higher interest rates.

The best option depends on your financial situation, income stability, and ability to provide documentation.

Low-doc loans require some documentation to verify income, whereas No-doc loans require no income verification, making them rare and highly specific.

Disclaimer - No doc loans are not offered by lenders anymore. However, you could still qualify for a low-doc loan instead.

Low-doc loans are available with various LVR options, from 60% to 90%. The choice of LVR affects the deposit required, the interest rate, and the overall cost of the loan. Low-doc loans might have lower borrowing capacity than full-doc loans. Use our borrowing calculator to get an estimate.

Typically, a deposit of at least 20-30% is required for low-doc loans, though this can vary by lender.

Mortgage brokers have access to a broader selection of low-doc loan options and bring valuable experience in working with these types of loans. They can evaluate your financial situation and help you identify a deal that aligns with your needs. This approach can save you time and effort, as brokers often know which lenders are more likely to approve your application and can assist in negotiating favourable terms.

Currently, only specialist lenders are accepting low-doc home loans. Each lender has its own set of criteria, documentation requirements, and interest rates. low-doc lenders in our lender panel include:

Bluestone Mortgages
LaTrobe Home Loans
Liberty Financials
MA Money
Uptail
ORD Finance
Pepper Home Loans
RedZed Lending Solutions
Resimac Limited
Consult with a mortgage broker to assist you in exploring the available products and identifying the lender that suits your needs. Our expert team is ready to guide you through the process and connect you with the right lender from our panel. Let us help you secure the best possible deal tailored to your unique situation. Call us today at 0862430351.

Yes you can, if you have a substantial deposit – typically 30% or more.

Still need answers? We're here to help!

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Related Topics

Flexible Documentation Requirements

Low Doc loans allow borrowers to apply without full financial documentation, making them ideal for self-employed individuals or those with irregular income.

Quick Application Process

With fewer documents needed, the approval process is often quicker than traditional home loans, giving you faster access to funding.

Customizable Loan Terms

These loans often come with flexible terms that can be tailored to suit your financial situation, including repayment options and loan amounts.

Access to Home Ownership

Low Doc loans enable individuals who might not meet the requirements for a standard home loan to still access financing and purchase property.

Higher Interest Rates

Since Low Doc loans carry higher risks for lenders, they often come with slightly higher interest rates compared to traditional loans.

Loan-to-Value Ratio (LVR) Considerations

Lenders may offer lower LVRs for Low Doc loans, meaning you might need a larger deposit, but this ensures you get the financing you need.

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