Low-doc loans require less paperwork to show savings history and capacity to repay the loan. However, low-doc lending has changed dramatically over the past
12 months, with low-doc borrowers now being limited to a maximum borrowing of 60% LVR without Business Activity Statements (BAS).
As a low-doc borrower, most lenders want to see your BAS or, if you have them, details of previous tax returns. These days, attempting to get ‘cash out’ as a low-doc borrower is very difficult. With the banks’ tight restrictions on who they can lend to, low-doc loans are becoming harder to get. Nevertheless, these loans are extremely handy for seasonal, self-employed and contract workers, and full-time investors. It essentially caters to those not meeting standard lending criteria.
Upsides
Low-doc loans have allowed thousands of Australians who, for various reasons, have been rejected by mainstream credit providers, to access a mortgage.
If you can supply sufficient documentation you will usually be able to borrow at mainstream lending rates.
Downsides
Low-docs usually attract higher interest rates and establishment fees than conforming products. Nowadays, low-doc loans have lower LVRs so you’re not able to borrow as much as before.
Suitable for
Low-doc loans are popular with property investors, self-employed, contract and seasonal workers or families who have just moved to Australia.