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What are low-doc loans?

What are low-doc loans?

Low-documentation or low-doc loans are for people - generally the self-employed - who have difficulty getting the documentation together that is required to get a traditional home loan.

Low-doc loans differ from another relatively new loan in the marketplace that is also gaining popularity - non-conforming loans. Low-doc loans have become very popular over the past few years and industry figures state they comprise around 10 per cent of all mortgage loans written.

Traditionally, the interest rate offered on these types of loans was higher than for the standard variable rate but recently they tend to be offered at similar rates. While lenders have various methods of establishing whether they will lend someone money, there are some major differences between mainstream and low-doc loans.

Differences between standard and low-doc loans

  • · Low-doc loans do not require traditional proof of income such as company financials or tax returns.
  • · Borrowers seeking a low-doc loan generally complete a declaration that confirms they can afford the loan. This is known as self-certification.
  • · Low-doc loans tend to be more attractive to self-employed people or full-time investors who may have difficulty showing a high level of income, as a result of either writing off a number of expenses, reinvesting profits into a business, or being slow in lodging their tax returns.

Borrowing tips

Borrowers wishing to obtain a low-doc loan will normally need to satisfy three requirements:

  • · Self-certify their income
  • · Confirm their self-employment status (if appropriate) - usually with a registered ABN or accountant's letter
  • · Have a clean credit history and good repayment record for existing or previous loans.

Compare Low-Doc Home Loans



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Today's Home Loan Rates

Institution Product
Title
Standard
Rate^ (%)
Comparison
Rate* (%)
Details
Advantage Home Loan 70 (No Offset) 3.64 3.66 Go to site
Home Value Loan - Owner Occupied 3.65 3.66 Go to site
Orange Advantage ($500k-$1m where LVR <=80% O/Occ) - Principal & Interest 3.69 4.01 Go to site
UHomeLoan SVR Value Offer (P&I) 3.74 3.74 Go to site
NAB Base Variable Rate Home Loan - Principal and Interest 4.17 4.21 Go to site
Institution Product
Title
Standard
Rate^ (%)
Comparison
Rate* (%)
Details

^Standard rate for a $250,000 standard loan. The 3 year table shows loans that are fixed for 3 years.
*Comparison rates shown are based on a home loan of $150,000 for 25 years. WARNING: This comparison rate is true only for the examples given and may not include all fees and charges. Different terms, fees or other loan amounts might result in a different comparison rate.
For information on how we’ve selected these “Sponsored” and “Featured” products click here.



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