In part 3 of our series on home loan types, we’re going to take a long look at low doc loans. More to the point, we believe that it is well worth investigating not only the particulars of these loans, but why they have made a return to our markets.

There are some unique advantages to these loans. However, by the same token, there are also some drawbacks that you’ll want to keep in mind.

What are home low doc loans?

A home Low doc loan is designed to appeal to self-employed individuals, in addition to those who own a small business. In particular, home doc loans can be particularly useful to those who are financially self-sufficient, but who perhaps do not have the financial information that is generally expected of those who seek a home loan. What does this mean exactly? Well it’s all in the name! The “low doc” name for low doc loans actually refers to low documentation, meaning the applicant will be held to a different documentation standard than those seeking more traditional loans.

Over the past few years, low doc loans have become extremely popular with individuals throughout Australia. Industry figures suggest that these loans are currently taking up approximately ten percent of all the mortgage loans that are currently being written.

It is not difficult to understand why these loans are so popular. For one thing, an increasing number of people are turning to career paths that are difficult to document in the ways associated with more mainstream career choices.

You will want to keep in mind that these loans tend to have higher deposit demands. Furthermore, you can also expect to have to deal with higher interest rates than the current average. These elements will be due to the fact that those seeking home doc loans are generally unable to provide the same degree of security to the lender, as those seeking the more mainstream loan options.

There are a few other conditions with low doc loans that you should try to keep in mind:

• You must be able to prove that you have been self-employed in a particular industry for at least 1 year. Your ABN or Certificate of Incorporation might be required.
• You will need to present the lender with your Business Activity Statements for the past twelve consecutive months. These must be verified through the ATO.
• 80% of the property value is the maximum amount that can be borrowed.
• You must confirm your income has been GST registered for at least 12 months.