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Low Doc Home Loan

Low Doc Home Loan


What are low doc loans? 

Low document or low doc home loan is basically for the self-employed and contractors who do not have any financial records and tax returns. As it requires minimum documentation, it is known as low document loan. Banks only used to approve loan applications of those borrowers who had guaranteed incomes. To lend to more borrowers who do not have a regular income, but have sufficient equity on their current property, the low doc loan has been introduced. Low-doc loans are generally considered to be riskier than standard loans because they are made available to people who typically have less regular income. The following provides you with an overview of what you need to provide to a lender in order to secure a low-doc loan. What you need to know

   1. Borrowers must demonstrate they have a clear credit history. Generally two small paid defaults are allowed if they are telco-related and under $500.
   2. Borrowers must demonstrate they retain at least 20 per cent equity in the security, although some lenders may require more.
   3. Borrowers may be required to prove they have had a registered ABN for a certain period of time.
   4. Borrowers may be required to complete an income declaration form if they cannot provide proof of income.
   5. Low-doc loans are generally mortgage insured. Some lenders absorb the cost of the mortgage insurance premium.
   6. A low-doc borrower that later provides financial statements and tax returns can usually request to have the loan re-assessed in order to have it revert to a standard loan with a lower interest rate.
   7. Rate reward discounts may be offered once a specific period of time has passed with no defaults or arrears.
   8. Low-doc loans are available through both bank and non-bank lenders.

Provider Home Loan Variable Rate Comparison Rate
Liberty Nova Home Loan (≤60% LVR) 4.39% 4.69%  
Liberty Nova Home Loan (60.01% - 70% LVR) 4.49% 4.79%  
Liberty Nova Free Home Loan (≤60% LVR) 4.64% 4.65%  
ProPack Lo Doc 4.64% 4.77%  
Liberty Nova Free Home Loan (60.01% - 70% LVR) 4.74% 4.75%  
Provider Home Loan Variable Rate Comparison Rate

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What are the types of low doc loans?

According to the difference in loan eligibility requirements, there are 3 main types of low doc loans. These are:
•    Self-declared income: This is the most common type of low doc loan. You have to give a signed declaration of your income and you will get loan upto 80% of the value of your property. The interest rates are more or less similar to that of full doc loans, but, some lenders may charge extra for mortgage premium insurance on loans above 60%.
•    Asset land: This loan requires almost no document or proof of income. The loan is given only on the basis of security of your property’s value. The interest rate for this type of loan is a bit higher.
•    Account statement: This type of low doc loan requires more substantial income proof, which can be a letter from your accountant also. The interest rate in this type of loan is also higher than that of the standard loans.


What are the advantages of low doc loans?

The advantages of low doc loans are mentioned below:
•    The loan is specifically offered to self-employed and small business owners who have good credit records
•    Very little documentation is needed to get this loan, compared to the standard loans
•    Some low doc mortgage lenders offer interest rate same as that of traditional loans
The lenders offering low doc home loans generally charge a high interest and fee for this loan. You should make sure that you have the affordability to repay the loan before you apply for it.



Home Loan Comparison interest rates in this table are based on a loan amount of $150,000 and a term of 25 years.

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