Low doc loans are specifically designed to meet the needs of the self-employed. You still have to apply in writing and sign your loan agreement, but instead of providing proof of income, you typically only need to sign a declaration stating your income and ability to meet your repayments (a process called self-certification).

Providing you meet the lender’s credit criteria, there is usually no need to supply financial statements or tax returns.

Buy a home or buy/expand a business

Most lenders will allow you to use a low doc home loan to purchase or refinance your home or to buy an investment property. What’s less well-known is that if you’ve been in the same business for two years or more, many lenders will allow you to use the funds to buy a business1, fund business expansion, purchase plant, equipment, fixtures and fittings, machinery or vehicles, or even to refinance an existing business loan or overdraft. This can be a cheaper alternative to a bank overdraft or secured business loan.

Do you qualify?

To apply for a low doc loan you typically need to have an ABN and have been working in the same business for 2 years or more. However with some lenders, such as RAMS Home Loans, you can apply after having an ABN for just one year if you are only borrowing 60% or less of the property value.

In some circumstances, you may qualify for a low doc loan without an ABN. For example, if you can prove that the majority of your income comes from non PAYG sources; rental income, dividend income etc.

If you’re not sure whether you’ll qualify for a low doc loan, check with your lender.

Features and flexibility

Low doc loans usually come with the same features as standard home loans. For example, most low doc lenders offer a choice of variable and fixed rate options, as well as features such as an offset facility and redraw, as well as low doc loans with all-in-one or line of credit access.

However, because low doc loans are considered more risky, there are often some limitations to consider. For example, the maximum loan amount for a low doc loan is usually limited to 80% of the property value or a maximum amount of $1,500,000. This means that if you choose a low doc loan, you will typically have to put down a larger deposit than if you take out a standard home loan.

Most low doc loans charge a slightly higher interest rate or have higher fees than a comparable standard home loan. However this isn’t always the case and some products, such as RAMS SE Pro Pack, have the same interest rates as the comparable full documentation home loans.

Is a low doc loan right for you?

If you’re self-employed and are considering a low doc home loan, discuss your situation with a home loan expert.

He or she will be able to advise you of the options available to you and help you choose the loan that’s best suited to your needs.



Real Estate Professionals