Low-doc and No-Doc Home Loans
No or little proof of income? Are you self-employed or a contract worker? Believe it or not, you can get approval for a home loan and enter the Melbourne property market.
Traditionally aimed at self-employed borrowers, low-doc home loans present more risk for the lender, therefore the risk is usually built in to the mortgage at cost to the borrower. The loan can be a fixed rate or variable rate mortgage, and can be used to borrow, up to 80% of the property. The lender will factor in the extra risk by using a higher interest rate, or charging lenders insurance.
However, self-employed borrowers, seasonal workers, as well as customers with no proof of income, who struggle to gain approval for the usual loan types can benefit from these loans that require less documentation or in some case, no documentation of your income. The loan itself operates the same way, but you are able to gain approval without as much documentation.
A low-doc loan still requires some evidence of income such as back statements or tax returns etc, while a no-doc home loan works by self certification. A statement signed by you declaring your income is accepted by the lender. Borrowers applying for a low-doc or no-doc home loan will need to have a clean credit history.
Advantages
Many borrowers find themselves without enough proof of income due to being self-employed, seasonal work employee, or because they have recently moved to Australia. Low-doc and no-doc home loans offer a reasonable and fair home loan alternative for these people who for whatever reason cannot disclose their income in full. If you have saved a deposit, you can usually negotiate a lower rate or ask the lender to waive some of the fees such as lenders mortgage insurance.
Considerations
Higher interest rates are usually applied to these loans, depending on the perceived level of risk by your lender. Lenders Mortgage Insurance and higher interest rates can quickly add up so it is important to do your research before committing to any loan. There may be other fees involved for a low-doc loan, although the more documentation you can provide, the less these will be. While you do not need to provide proof of income, most lenders will require a clean credit history. Often, low doc home loans will have a shorter term period, some as short as a year, which means that the lender will require you to refinance at the end of the term.
These loans are best suited to borrowers who are unable to provide full financial documentation to obtain a regular home loan.
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More in this Section | Debt consolidation works by you grouping together all your debts into one | Thinking about refinancing your mortgage? | Home Loans in Melbourne | Pre-approval for your home loan | Considering a no-deposit home loan? |
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