What’s a low doc loan, and can it help me avoid losing my off-the-plan deposit?

• Designed for individuals who might not have the standard documentation typically required for traditional loans.
• Beneficial for self-employed individuals, freelancers, or small business owners with irregular or non-traditional income streams.
• Applicants provide alternative documentation, such as bank statements, business activity statements, and income declarations.

Full Doc | Low Doc | Alt Doc | No Doc

• Full Doc: Extensive documentation, lower risk, potentially better rates.
• Low Doc: Minimal docs, suitable for self-employed with irregular income.
• Alt Doc: Flexible docs, broader range accepted.
• No Doc: No income proof, equity-based, rare and high-interest.

Is it easy to get low doc loan approval?

• 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.
• Pro-tip: Only provide the documents requested by the lender, nothing more!

What are the main features of low doc loan?

• Flexible income verification: Accepts alternative documents like business activity statements (BAS), bank statements, and accountant letters.
• Higher interest rates: Often have higher interest rates than standard home loans.
• Lower Loan-to-Value Ratio (LVR): Requires a larger deposit.
• Limited loan features: Some features might be restricted or unavailable.
• Additional fees: Some lenders may charge higher fees for low-doc loans.

What do I need to look out for?

• Higher interest rates: Depends on the lender and the type of verification or supporting documentation you can provide.
• Larger deposit: Typically 20% of the purchase price is required.
• LMI: Mortgage insurance is usually applicable if you borrow over 60% Loan-to-Value Ratio (LVR).

Am I eligible to get a low doc loan?

• Generally, the borrower must be self-employed in the same industry for at least a year.
• Alternatives to traditional income verification, such as BAS, business bank statements, and accountant letters, are generally accepted.
• Different lenders have varying policies. The maximum LVR without LMI is determined case by case.

Should I and how do I refinance from Low Doc to Full Doc?

• Yes, you should. When you can provide full income evidence, you can qualify with more lenders at a much cheaper rate and have access to more products.
• Documents needed for a full doc loan:
  • Last two years’ financial statements (profit and loss and balance sheet).
  • Last two years’ business tax returns.
  • Last two years’ personal tax returns.
  • Last two years’ notices of assessment.
  • 6 months home loan statements.

What documents do I need to provide?

• Supporting documents to verify your declared income.
• Main documents that can be used to verify your income:
  • 6- to 12-month BAS statement showing a high turnover.
  • An accountant letter verifying your income.
  • Business bank statements showing a high turnover.
  • Interim financial statements.
  • Verification of ABN registration.

Why do lenders ask for Business Activity Statement (BAS)?

• BAS was introduced by the Australian Tax Government (ATO) to report GST and PAYG withholding tax obligations.
• Allows lenders to verify a client’s turnover and decrease the risk that comes with low doc loans.

How does lenders calculate my income?

• Most lenders require your previous four quarters’ BAS, which equates to twelve months of statements.
• Each quarter’s turnover will be calculated to produce a gross annual turnover.
• Some lenders use 40% of your turnover as your income, while others may use 50%.

All about the BAS

• Not every lender uses the 40% rule. Some use a higher percentage of turnover or calculate your income using a different method.
• BAS is the most widely accepted form of income verification for low doc loans.

Pros & Cons of low doc loan

• Pros:
  • Accessibility for self-employed and non-traditional earners.
  • Flexible documentation requirements.
  • Potentially faster approval process.
• Cons:
  • 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.

Property purchasing costs

• Minimum of 5% deposit.
• Stamp duty.
• Property title transfer fee.
• Registration fees.
• Conveyancing fees.
• Inspections including building/strata and pest.
• Home loan set up fees.
• Lenders Mortgage Insurance (LMI).

Property selling costs

• Agent Fees
• Marketing Costs
• Conveyancing Fees
• Capital Gains Tax (CGT)
• Presale Repairs and Renovations
• Styling/ Home Staging
• Auctioneer’s Fees
• Lender Fees
• Moving Costs