Shopping around for a home loan can be a daunting experience, especially for those who don’t fit the traditional employment mould. This is where low doc home loans come in - a path to property ownership for people where traditional loan requirements may be out of reach.
What is a low doc home loan?
Low doc (short for low documentation) home loans are designed for people who might struggle to provide two years of tax returns or financial records required for a traditional home loan. This type of loan is particularly appealing to self-employed individuals, freelancers, and small business owners who may not have a regular income stream or up-to-date financial statements.
Unlike traditional home loans, low doc home loans require less documentation. Instead of the usual pay slips, tax returns, or financial statements, applicants may provide alternative proof of income. These could include Business Activity Statements (BAS), bank statements, accountant's letters, or a self-certification of income.
Lender | Home Loan | Interest Rate | Comparison Rate* | Monthly Repayment | Repayment type | Rate Type | Offset | Redraw | Ongoing Fees | Upfront Fees | LVR | Lump Sum Repayment | Additional Repayments | Split Loan Option | Tags | Features | Link | Compare |
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
6.09% p.a. | 6.10% p.a. | $2,421 | Principal & Interest | Variable | $0 | $498 | 80% | |||||||||||
6.54% p.a. | 6.54% p.a. | $2,539 | Principal & Interest | Variable | $0 | $0 | 60% | |||||||||||
6.94% p.a. | 7.31% p.a. | $2,645 | Principal & Interest | Variable | $395 | $200 | 90% | |||||||||||
7.24% p.a. | 7.50% p.a. | $2,726 | Principal & Interest | Variable | $15 | $995 | 55% | |||||||||||
7.44% p.a. | 7.39% p.a. | $2,780 | Principal & Interest | Variable | $0 | $1,110 | 75% | |||||||||||
7.44% p.a. | 7.62% p.a. | $2,780 | Principal & Interest | Variable | $10 | $599 | 80% | |||||||||||
7.89% p.a. | 7.92% p.a. | $2,904 | Principal & Interest | Variable | $15 | $1,110 | 75% | |||||||||||
8.04% p.a. | 8.30% p.a. | $2,946 | Principal & Interest | Variable | $15 | $995 | 85% | |||||||||||
8.39% p.a. | 8.71% p.a. | $3,045 | Principal & Interest | Variable | $395 | $0 | 90% | |||||||||||
8.54% p.a. | 8.89% p.a. | $3,087 | Principal & Interest | Variable | $15 | $1,860 | 70% |
What’s the difference between low doc home loans and regular home loans?
Low doc home loans and regular home loans cater to different types of borrowers - the primary distinction between the two lies in the documentation required for loan approval.
Regular home loans, designed for employees with a steady income, require comprehensive financial documentation such as pay slips, employment history, and tax returns. In contrast, low doc loans are tailored for self-employed individuals or those with irregular income streams. These loans demand less conventional proof of income, often relying on self-certified income declarations or accountant's letters instead.
However, this flexibility comes at a cost; low doc loans typically have higher interest rates and fees due to the perceived increased risk to the lender. Additionally, low doc loans often require a lower Loan-to-Value Ratio (LVR), meaning a larger deposit might be needed compared to standard loans.
Who are low doc home loans for?
The typical applicant for a low doc loan is self-employed or runs a small business, where income can fluctuate, and traditional proof of income is not readily available. Low doc loans are suited for borrowers who are self-employed, business owners, sole traders, contract workers, freelancers, etc.
Am I eligible for a low doc home loan?
Eligibility requirements may differ from lender to lender, but typically you must have a registered Australian Business Number (ABN) and be self-employed or running a small business. Applicants also usually need to have been in business for at least two years.
What documents are required for a low doc home loan?
The specific documents required for a low doc loan can vary, but often include:
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Registered business name and ABN: Demonstrates legitimate self-employment or business operation.
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Business Activity Statements (BAS): Usually 12 months' worth of statements to evidence income.
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Business financial statements: Provides a broader view of the business's financial health.
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Accountant's letter: An official statement from a certified accountant verifying your income.
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Self-certified income declaration: A statement from the borrower confirming income levels.
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Proof of identity: Standard ID documents like a driver's license or passport.
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Credit history report: To assess creditworthiness and past financial behavior.
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Property details: Information about the property being purchased or used as security.
Each lender has their own criteria, so it's essential to check individual requirements before applying.
What are the pros and cons of low doc home loans?
Pros:
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Flexibility for self-employed or non-traditional income earners to secure financing
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All the usual home loan features such as offset accounts, line of credit, split and interest only loan repayment options, the ability to make extra and more frequent repayments
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Principal and interest, or interest only loans
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Simple income declaration form
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Alternatives to tax returns as evidence of income
Cons:
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Not all lenders offer low doc loans
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Higher interest rates
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Lower LVR (bigger deposit)
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Higher fees
Which lenders offer low doc home loans?
Several lenders offer loc doc home loans in Australia, including:
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Liberty Financial. This lender offers low doc home loans with flexible income verification and 85% LVR.
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Pepper Money. Pepper’s Alt Doc Loan option is for self-employed or small business owner borrowers, which includes those who have credit impairment.
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Yard. Yard lends to self-employed borrowers with 2 years of trading history under the same ABN. Professionals who have recently become self-employed must have traded under an ABN for at least 6 months.
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RAMS. RAMs offers low doc home loans for self-employed borrowers.
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Resimac. Resimac is a non-bank lender that offers an Alt Doc product catered to self employed applicants.
Each lender has unique criteria and terms for their low doc home loans, so it's advised to compare options and consult directly with lenders or a financial advisor to find the most suitable option for your needs.
FAQs
Can you buy a house with no income?
Unless you are flush with a lot of disposable income, buying a house with no income is near impossible. You can however buy a home with a low income if you can prove that you have the ability to repay the loan and have a good credit history.
Can you buy a house while unemployed?
Without some form of employment, it will be very difficult to secure a home loan as you will struggle to make the repayments. An income is the main factor that determines whether or not a lender will give you a loan.
How much can I borrow if I’m self-employed?
Borrowing capacity may be capped at 60% of a property's value by some lenders, with the possibility of incurring Lenders Mortgage Insurance (LMI) for bigger loans. However, the ability to borrow at a higher LVR can depend on demonstrating a stable and reliable income, especially for those with a longstanding and consistent business history.
Can I switch from a low doc loan to a regular home loan later?
Yes, it's possible to switch from a low doc loan to a regular (full doc) home loan if your financial situation stabilises and you can provide the standard documentation required for a regular home loan. This transition process involves reassessing your financial circumstances and refinancing to a new loan.
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Collections: Home Loans Buying a home
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