Low doc loans are designed for applicants who do not qualify for a traditional home loan through a bank. Low doc stands for low documentation. These loans still require the application to be made in writing, however you may not need to provide much supporting documentation evidencing your income. Lately however a number of lender do require BAS statements to be provided with your application.
Who should consider a Low Doc Mortgage?
Low doc loans are designed to benefit those people who have some existing equity or a deposit saved, and have trouble showing evidence of regular income. This could apply to the self-employed or casual workers. These loans were designed to assist the self-employed who are too busy to prepare up-to-date financial statements.
Why Low Doc ?
If you fall into any of the categories above and wish to purchase a property, a low doc loan could be your only option for obtaining the required finance. As with any major financial decision, always weigh up the pros and cons and determine whether you can afford the repayments. There could also be extra costs involved as many lenders will charge an inflated interest rate when standard documentation is not produced on application. Mortgage insurance is also a standard requirement with low doc loans, which adds further to the cost.
Most low doc loans will cover up to 80% of the value of the property (80% LVR), although the more financial documentation although these days many lenders will require the applicant to cover the cost of LMI for a loan over 60%.