A low documentation loan, also known as a low doc loan, is a type of mortgage that doesn’t require borrowers to provide extensive financial documentation to their lender. Low doc loans are typically available to self-employed borrowers, or those who have an ABN, and can be a great option if you’re finding it difficult to secure finance through traditional channels.
However, low doc loans often come with higher interest rates and fees than other types of loans, so it’s important that you understand how they work before making any decisions. In this blog post, we’ll give you an overview of low doc loans and everything you need to know about them.
What is a low documentation loan?
As we mentioned above, a low documentation loan is a type of mortgage that doesn’t require borrowers to provide extensive financial documentation to their lender. This can make it much easier to qualify for a loan, especially if you’re self-employed or work on a contract basis.
There are different types of low doc loans with each having a different supporting income verification requirement. As a rule – the less documentation, the lower the available loan amount, loan to value ratio (LVR) and higher rates and fees. The objective of the broker is to find the right type of low doc loan that maximises your benefit.
Not all lenders offer low doc loans but the ones that do are invariably very good at it and will have the experience and credit policy that fits your need. As a bonus, low doc loans do not lock you in for the future. Once your financial circumstances allow, your loan can be refinanced using more traditional channels.
What are the requirements for a low documentation loan?
Generally speaking, the requirements for a low documentation loan are not as stringent as they are for other types of finance. All you’ll usually need to provide is proof of ID, income (whether that be applicant declaration, accountant letter, evidence of business income via bank statements and/or BAS submissions), and employment status.
Maximum loan amounts and loan to values
These vary and are generally provided in a matrix where the max. LVR reduces as the loan amount increases. However LVR is generally limited to 80% and loan amounts to $2m.
Is a low doc loan right for you?
Low doc loans are a very effective means of obtaining finance for self-employed applicants. If you’re having trouble securing finance through traditional channels, then a low doc loan could be a viable option for you. Just be sure to shop around and compare your options before making any decisions.
If you’d like to know more about your eligibility or suitability for a low doc loan, book a confidential and obligation-free chat with me here.
