Low Doc and No Doc Loans
Friday, November 24, 2006
They are products targeted at the self employed who:
Have been trading under two years, and don’t have the financials required to support a ‘full documentation’ loan
Have been trading longer than two years but don’t have, or don't wish to supply the financials to support their income
ABN’s are generally required to qualify for Low & No doc loan
Low Doc
Process: Low doc borrowers fill out a normal home loan application, including their income. The only difference is that they do not need to supply documents that verify the income, rather they sign a form to say they can meet the proposed repayments
Deposit Required: Most lenders require an 20% deposit, although some major lenders are now accepting a 15% deposit.
Interest Rates: Some lenders are much better than others. They have certainly come back a long way from a few years ago. There are lenders that offer a 0.7% discount off the Standard Variable Rate, potentially even more for a large deal.
Mortgage Insurance: Given the added risk of Low doc loans, some lenders will charge the customer mortgage insurance for loans over 60% of the value of the property (up to a maximum 80%). There are some lenders that will not charge between 60-80% however their rates are generally a little higher.
There are some non-conforming lenders that will lend up to 95% low-doc, however the rates and fees reflect the higher risk to the lenders.
No Doc
Process: No Doc loans are again a normal application, however the borrowers are not required to include their income, or of course, provide proof of income.
Deposit Required: Most lenders require a minimum 30% deposit
Interest Rates: There are a few leaders in this market. The better rates are approximately 0.5% discount on the Standard Variable Rate.
Mortgage Insurance: No mortgage insurance is generally charged, loans are a maximum of 70% of the value of the property.
Low and No doc loans, although not quite as competitive as a standard ‘Full doc’ product, have come a long way of late and are now a serious option for many buyers – particularly those who struggle supplying proof of income!
posted by Daniel Serratore @ 9:01 am,
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The Author
Daniel Serratore
Daniel is heading up the new generation of Finance Brokers in Sydney. With his fresh approach and "can do" attitude, Daniel has developed relationships with key people within the Sydney lending market which enables him to source great deals for his clients. Daniel is big on customer service and has built his business purely by referrals from clients and other businesses. You can catch him via the email link on the top of this page
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This blog was developed as a resource for our clients and the general public. Although the internet will provide you with many lending providers, I am still to find a resource that shares ideas, tips and general useful info to assist borrowers make the right decisions. Hence this blog was born!
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