Compare low doc home loans
Not everyone can get a regular home loan. For some, low doc home loans are the best available option. In the land of the fair go, small businesses are often lauded for being one of the pillars of Australia's economy. Yet small business owners don't necessarily get a fair go when it comes to applying for a home loan. Given self-employed workers don't earn a set salary in the traditional sense, it can be more of a challenge for them to prove their ability to repay a mortgage. Fortunately, there is a type of home loan specifically designed to cater to these workers: low doc home loans.
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Compare low doc rates
Buying a home or looking to refinance? The table below features home loans with some of the lowest interest rates on the market.
|Lender||Home Loan||Interest Rate||Comparison Rate*||Monthly Repayment||Repayment type||Rate Type||Offset||Redraw||Ongoing Fees||Upfront Fees||LVR||Lump Sum Repayment||Additional Repayments||Split Loan Option||Tags||Features||Link||Compare|
Principal & Interest
Principal & Interest
Principal & Interest
Base criteria of: a $400,000 loan amount, variable, fixed, principal and interest (P&I) home loans with an LVR (loan-to-value) ratio of at least 80%. However, the ‘Compare Home Loans’ table allows for calculations to be made on variables as selected and input by the user. Some products will be marked as promoted, featured or sponsored and may appear prominently in the tables regardless of their attributes. All products will list the LVR with the product and rate which are clearly published on the product provider’s website. Monthly repayments, once the base criteria are altered by the user, will be based on the selected products’ advertised rates and determined by the loan amount, repayment type, loan term and LVR as input by the user/you. *The Comparison rate is based on a $150,000 loan over 25 years. Warning: this comparison rate is true only for this example and may not include all fees and charges. Different terms, fees or other loan amounts might result in a different comparison rate. Rates correct as of . View disclaimer.
- What is a low doc home loan?
- Who are low doc home loans for?
- What documents are required for a low doc home loan?
- How do low doc home loans compare?
Obtaining a home loan to achieve your property dreams can seem daunting if you are self-employed or low on documents. Generally, self-employed workers will not earn a traditional salary, creating a greater challenge for them to prove their ability to repay a mortgage. Here you’ll find lenders offering low doc home loans, as well as the documentation required, and how you can get approved for a low doc home loan.
What is a low doc home loan?
A low doc or ‘low documentation’ home loan is generally available to those unable to provide two years of tax returns or financial records that a standard home loan application requires. This typically includes those self-employed or those who own their own business.
Low doc home loans were first introduced by non-bank lenders through mortgage brokers in the late 1990s to provide an alternative to mainstream lending. These days, not every lender offers low doc loans - those that do often require a larger deposit or charge a higher interest rate than regular home loans.
Who are low doc home loans for?
Low doc home loans are special lending products for those who might struggle to provide the standard proof of income documentation needed to apply for a home loan. This documentation typically includes:
- Copies of most recent payslips.
- Pay summaries.
- Rental income statements.
What documents are required for a low doc home loan?
Given those applying for a low doc home loan are typically self-employed or run their own business and are unable to provide all documentation, proof of income is required using a combination of the following:
- Proof of ABN and/or GST registration.
- Business Activity Statements (BAS).
- Business Account transaction statements.
- Accountant's letter.
- Personal tax returns.
Because of the National Consumer Credit Protection Act (NCCP) Act, lenders are required to have some kind of income verification from you before they approve your loan, so unless you can provide some proof of income, you won’t be approved.
How do low doc home loans compare?
Generally speaking, low doc home loans don’t have interest rates that are as competitive as regular home loan rates. In most cases, they come with higher rates to compensate lenders for the higher perceived risks low-doc borrowers might pose.
The standard home loan fees usually apply to low doc home loans too – that’s upfront and ongoing fees as well as refinancing fees or break costs for fixed-rate loans. These fees can also be higher than normal loans although this will depend on the lender.
Instead of charging lenders mortgage insurance, some low doc loan providers might charge a risk fee (also known as a low deposit premium) to account for the added risks associated with a low deposit loan.
A positive of low doc home loans is that they can still come with the usual home loan features:
- 100% offset accounts.
- Line of credit options.
- The ability to make extra & more frequent repayments.
- Split and interest-only loan options.
Loan-to-value ratio restrictions
Low doc providers are less likely to accept borrowers with deposits smaller than 20%. In fact, some restrict low doc home loans to a maximum loan-to-value ratio of 60%, which would require a deposit of at least 40%. This can also depend on how long you have been in business. Those who have been in business under the same ABN for over two years may be able to borrow more.
Savings.com.au’s two cents
Low doc home loans are a useful product for those self-employed looking to enter the property market. However, those who aren’t careful can get stuck paying higher interest rates for the life of their home loan.
It’s possible to refinance from a low doc home loan to a full doc or standard home loan after a few years, provided you:
- Have regularly met your repayments.
- Have maintained a clean credit history.
- Can provide your tax returns as proof of income.
If your lender allows you to do this, then switching to a full doc home loan could be much cheaper in the long-run.
Article first published 30 May 2019, last updated 21 October 2022.
Frequently Asked Questions
The policies of different lenders may vary, but you will generally need to provide proof of income.
If you're self-employed, some lenders won't allow you to borrow any more than 60% of the value of the property. Those that do will likely charge Lenders Mortgage Insurance (LMI). However, this can all depend on how stable and reliable you can prove your income to be. Someone with a strong history of earning a reliable income running the same business for many years is likely to be able to borrow at a higher LVR than someone that's only been self-employed for a year.