Compare Low Doc Home Loans in Australia

What is a low doc home loan?

Shopping around for a home loan can be a daunting experience, especially for those who don't fit the traditional mould when it comes to their employment situation.

This is where low doc home loans can come in handy, providing a path to property ownership for people who might find traditional mortgage requirements out of reach.

Low doc - short for low documentation - home loans are designed for people who might struggle to provide two years of tax returns or the financial records required for a traditional home loan.

These products can be particularly appealing to self-employed individuals, freelancers, and small business owners. Especially those who mightn't have a regular income stream or up-to-date financial statements

What's the difference between low doc home loans and regular home loans?

Low doc home loans cater to a different type of borrower than traditional home loans. The primary distinction between the two lies in the documentation that needs to be provided for loan approval.

As the name suggests, low doc home loans require less documentation than typical mortgages.

Traditional home loans are often designed for employees with a steady income. In contrast, low doc loans are tailored for self-employed individuals or those who rely on irregular income streams.

While borrowers might traditionally need to provide pay slips, employment history, tax returns, or financial statements to prove their income, those applying for a low doc home loan may offer alternative evidence of cash flow. Such might include Business Activity Statements, bank statements, or an accountant's letter.

However, this flexibility can come at a cost. Low doc home loans typically demand higher interest rates and fees due to the perceived increased risk they present to a lender.

Additionally, low doc home loans often require a lower loan-to-value ratio (LVR), meaning a borrower might need a larger deposit.

Who are low doc home loans for?

Low doc loans are often best suited to borrowers who are self-employed, own a business, work as a sole trader, contract worker, or freelancer.

If you fit into any of these categories, or have another income arrangement that's difficult to document, you might find that your income can fluctuate, making it challenging to provide traditional proof of income to a lender.

Am I eligible for a low doc home loan?

Eligibility requirements for low doc home loans may differ between lenders, but you'll typically need to have a registered Australian Business Number (ABN) and be self-employed, running a small business, contracting, or freelancing.

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 to secure a low doc home loan can vary, and borrowers might be able to mix-and-match those they provide to give lenders a clear picture of their finances.

Ultimately, a lender will simply want to know you receive the income you say you do from the sources you say you get it from. Documents that can help to evidence this include:

• Registered business name and ABN
  Providing an ABN and a registered business name can help prove you're legitimately self-employed.
  
  
• Business Activity Statements (BAS)
  Usually, providing 12 months' of statements can help evidence your income.
  
  
• Business financial statements
  Your business' financial statements can give a lender a broader view of its financial health.
  
  
• Accountant's letter
  An official statement from a certified accountant can also help to verify your income.
  
  
• Self-certified income declaration
  You might also want to provide a declaration from yourself confirming your income.
  
  
• Proof of identity
  Just because you're applying for a low doc home loan doesn't mean you don't need to prove you are who you say you are. Your lender might ask for ID documents such as your drivers license or passport.
  
  
• Credit history report
  A credit history report can help a lender assess your creditworthiness and previous financial behavior.
  
  
• Property details
  A lender will also want specific information on the property being purchased, as it will likely be used as security against the home loan.

What are the pros and cons of low doc home loans?

Pros:

• Provides flexible financing solutions tailored for self-employed individuals or those with non-traditional income streams
  
  
• Offers many standard home loan features, such as offset accounts and the ability to make additional repayments
  
  
• Allows borrowers to choose between principal and interest or interest-only repayment options
  
  
• Typically requires less documentation compared to traditional home loans
  
  
• Accepts alternative methods for verifying income, making it easier for non-traditional earners to qualify

Cons:

• Limited choices of lenders, as not all lenders offer low doc loans
  
  
• Typically come with higher interest rates compared to standard home loans
  
  
• Often require a lower LVR, meaning a larger deposit might be needed
  
  
• May involve higher fees, which could add to the overall cost of the loan

Which lenders offer low doc home loans?

Several lenders offer low doc home loans in Australia, including:

• Liberty Financial
  This lender offers low doc home loans with flexible income verification and LVRs as high as 85%.
  
  
• Pepper Money
  Pepper's Alt Doc Loan option is for self-employed or small business owner borrowers, including those who have impaired credit.
  
  
• Yard
  Yard typically lends to self-employed borrowers who have two years of trading history under the same ABN. Though, they may offer mortgages to those who have traded under an ABN for at least 6 months.
  
  
• 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 loan products.

It's advised to compare your options carefully and consult directly with lenders or a financial advisor to find the most suitable option for your needs.