7 Things You Should Know About Low-Doc and No-Doc Loans
Low-doc and No-doc loans can be obtained at interest rates similar to or equal to standard home loan rates.
Lo Doc/No Doc loans are designed for the self employed and professional investors who can’t provide up to date income information. In some limited instances PAYG borrowers are also eligible.
The key difference between the two types of loans is that Low-Docs generally require a signed declaration of income; No-Doc loans may just require an undertaking that the borrower can afford to repay the loan. Most lenders will also ask for a list of assets and liabilities.
Self Employed borrowers must have an Australian Business Number. In some instances an ABN may only be required for 1 day, but borrowers must have a history of working in the same industry for 12 months.
Some Lo-Doc lenders will fund up to 90% of the purchase price of a property, although most will only go to 80%. The interest rate will be higher for loans of more than 80%. No-Doc lenders will generally only fund up to 70% of the purchase price especially if you are a PAYG borrower.
If you borrow more than 60% of the purchase price you will be required to pay lender’s mortgage insurance. Many lenders will allow you to add the cost of the insurance to the loan
The Australian Tax Office has been targeting Low-Doc and No-Doc borrowers to identify those who have failed to lodge tax returns or are concealing income.
