Low Doc home loans are a popular option for those who are self-employed or don’t have regular income proof. They allow borrowers to self-certify their income details with a signed declaration document rather than traditional proof such as payslips and financial statements.
However, they are not suitable for everyone and it’s important to seek specialist advice. A mortgage broker may be able to help you find the best options for your needs.
Self-Employed
Millions of Aussies are self-employed, which can be a great way to earn extra income or pursue a lifestyle goal. However, this can also mean a fluctuating income and less stable financial circumstances.
Fortunately, the Australian government has enacted new laws to make it easier for self-employed individuals to secure a home loan. These laws enable lenders to look at a variety of different forms of proof when assessing an application for a mortgage.
To access a low doc home loan, you will need to provide a signed income declaration, as well as other documentation to prove your income. This might include bank statements or tax returns, depending on the lender you choose.
While most major banks have tightened their lending criteria on full doc loans since the GFC, there are still a number of lenders who offer low doc home loans. These loans require a higher deposit and can be harder to qualify for, but they may be worth considering if you’re self-employed or need a flexible loan option.
Contract Workers
Are low doc home loans still Available in Australia for the contract workers? These loans are designed for self-employed people, freelancers, small business owners and others who can’t provide two years of pay-slips, tax returns or financial statements as proof of income.
Lenders want to know that you can afford your monthly repayments, so they’ll assess your taxable income. This is based on your past tax returns and can be difficult to verify in real-time.
Alternatively, they may require you to submit a BAS or bank statement as proof of your income. This can be more challenging for new or part-time self-employed workers.
However, they can be a useful way to get your foot in the door with a property purchase without paying a high interest rate and are often a great option for seasonal employees. It’s also worth comparing different low doc home loan deals to ensure you’re getting the best deal for your situation.
Unconventional Borrowers
Since the GFC, many lenders have tightened their lending criteria on both full doc and low doc loans. However, a growing number of lenders are still offering these types of loans, and they offer an alternative option for self-employed borrowers who cannot provide traditional documentation like pay-slips or tax returns as proof of income.
Lenders typically assess your income using your taxable income, which is the amount of money you earn after paying tax. The higher your taxable income, the more you can borrow on a home loan. If you’re unsure if you’ll be able to afford a loan, talk with a mortgage broker. They’ll be able to assess your financial situation and recommend a loan that’s right for you.
Mortgage Brokers
As the name suggests, a low doc home loan is a specialized mortgage option that doesn’t require traditional income documents such as tax returns and financial statements. Instead, it uses a self-verification process to confirm income details, which is perfect for the self-employed, contract workers and small business owners who don’t have access to these standard documents.
