How to get a low doc home loan

When you’re self-employed and can’t prove your income easily, low doc loans come to your rescue. Here are some tips on how you can choose the right low doc loan for you.

New technologies make it easier for Australians to work as sole traders or run their own businesses. And millions do so – driven by their passions, lifestyle goals, or simply necessity. There are estimated to be over two million small and medium-sized businesses in Australia helping to power the nation’s economy. Working for yourself provides freedom and flexibility, but it can mean a fluctuating and less secure income. This can make it harder to secure a traditional home loan, which usually requires three years of tax returns to prove a steady income. Often self-employed people do not have this paperwork, particularly if they have recently started their businesses. Fortunately there are low doc home loan products available that cater to this growing market segment. Find out more:

  • What does low doc mean?
  • Who could benefit from a low doc loan?
  • What types of low doc loans are there?
  • What features are generally available on a low doc loan?
  • What features are generally not available?
  • How to get approval for a low doc loan?
  • What to do next

What is a low doc loan?

In Australia, a low doc loan means you don’t need to provide three years’ worth of financial statements or tax returns to be eligible for a mortgage. Low doc loan products are designed for lenders who have a good deposit or income and the ability to service their debt, but do not necessarily have the paperwork to validate this. Lenders will still need to be comfortable though that you can meet your repayments. They will generally still need you to provide evidence of income, but may have different documentation requirements. They may ask you for:

  • your business activity statement for the last 12 months,
  • business bank statements,
  • interim financial statements,
  • tax returns for last two years,
  • a letter from your accountant that verifies your income. You will also need to provide some basic information about your business, such as its name, ABN and GST details. Generally you will pay a higher interest rate or higher fees and charges for a low doc loan product as they carry more risk to the lender. However a low doc loan could enable you to buy the property of your choice at a time that suits you. Furthermore, many choose to refinance their mortgage – and potentially access lower interest rates, lower fees, and better product features – when they have the necessary paperwork to qualify for a full-doc loan. Need a home loan?UNO. The new way to get a better deal. Get Started

Who could benefit from a low doc loan?

Typically those who are self-employed or who cannot easily prove their income opt for low doc home loans. Likewise those who have fluctuating incomes, or who have received lower income than usual during the last financial year could be well served by a low doc loan. Like a full-doc loan, borrowers will still need a clean credit file and history of paying their debts on time. It helps also to have a substantial deposit – or equity in property – to avoid paying Lenders Mortgage Insurance (LMI). Most lenders prefer a Loan to Value Ratio (LVR) of less than 60% given the increased risk of default that low doc loan products carry. If you need to borrow more than 40% of the value of the property, you will usually need to pay Lenders’ Mortgage Insurance. Generally your application is more likely to be approved if you are seeking to borrow less than $1 million.

What types of low doc loans are there?

There are different types of low doc loans, which come with different interest rates, fees and charges. For example:

  • No Business Activity Statement (BAS) Low Doc Loans – If your income is under $75,000 and you are not registered for GST, then you cannot provide a Business Activity Statement. In this circumstance there are some lenders who will accept an accountant’s letter or business bank account statements as proof of earnings
  • No Payslip Low Doc Loans – If you do not have pay slips you will need to find other ways to prove your earnings. This could be a letter from your employer, or providing your bank statement or tax returns.
  • No income, no assets loan – This enables you to access a loan product even if you cannot prove your income. Your loan will, however, need to meet a number of criteria. Lenders will require you to sign a declaration stating that you can afford the loan; they will also want to know how you will repay the debt, such as through the sale of another property.

What features are generally available on a low doc loan?

There are a number of features – available on low doc loans – that can help you better manage your finances or pay your debt off sooner. These include:

  • Additional payments – this allows you to make extra payments without incurring a cost. Some lenders will limit the number of additional repayments you can make or charge a fee for this. Making additional payments could be a useful if there are times when you earn more money than normal, and you want to use these funds to reduce the interest that you pay on your home loan.
  • Redraw facilities – this allows you to redraw additional payments that you have made into your home loan. This may help you meet financial obligations for unexpected costs or when cash flow is tight.
  • Interest-only repayments – this means that for an agreed period you only pay the interest on the amount borrowed; you do not make any payment towards the principal. This minimises your repayments in the short term, anticipating the property will grow in value over the long term.
  • Offset accounts – this means you can use your excess funds to offset the principal of the loan. For example, if you have $400,000 outstanding on your loan balance and have $10,000 in savings, you would accrue interest on $390,000. This reduces the interest that you pay over time, meaning you can pay off your loan faster.
  • Flexible rates – some providers allow you to choose between fixed and variable rates or split your loan to access different interest rate structures. Fixed interest rates tend to be higher, but can offer peace of mind that you can afford your repayments through the life of the loan.

What product features are generally not available?

Low doc lenders do not normally accept or offer:

  • third party guarantees (a loan that is guaranteed by someone else in the event that the borrower defaults)
  • repayment breaks – a feature that allows you to take a break from repayments for an agreed perio
  • introductory interest rates – a lower initial interest rate of between one and three years before reverting to a standard interest rate.

How to get approval for a low doc loan

Here are some things to bear in mind when making your application:

  • Do not overstate your income. Lenders will be wary of you if your income does not seem plausible for your age and occupation.
  • Provide a clean credit history – make sure that you have made debt repayments for at least six months so defaults are no longer on your credit record. (If this isn’t possible, you may still be able to access a low doc loan through a specialist lender)
  • Present your business in the best possible light with your business activity statement and business bank statements showing a high turnover.
  • Demonstrate a good asset-to-income ratio – this means that you have more in assets (things that you own outright) than you earn, demonstrating good financial management. For example, if you earn $120,000 a year, lenders may want to see that you have around $240,000 in assets.
  • Ensure your paperwork is in order and that you have ABN and, if relevant, GST registration.
  • Work out how much you can afford to borrow.

What to do next

Engage a UNO adviser to help you find an appropriate loan. We advise first-time buyers and seasoned property investors, making the application process as straightforward and hassle free as possible for everyone. We can advise you on:

  • which lenders offer low doc loans;
  • what documentation they require;
  • what interest rates, fees and features are available;
  • how to make your application as strong as possible. You can also check out our calculators to compare home loan products and get the best rates available. With Alexi NeocleousThis information is general in nature and you should always seek professional advice when making financial decisions. Book a call in with UNO

Book Call Now

UNO home loans

Need help with your home loan?

UNO Brokers are available night and day for a quick review or your situation and bring expertise that will support better decision making that will save you time and money. Book in a quick call when it suits your busy schedule

Get Started

Related Articles

TESTIMONIALS

What our customers are saying

Sam Rezai
October 2, 2024
I have gone through 6 different mortgage brokers prior to meeting Andrew Wyers. He is the most patient mortgage broker I’ve encountered and also the most knowledgable about the bank’s lending process and products available. It took me 1 year to find a house I was happy with and Andrew was always there to assist with any issues or questions I had; he always return my phone call, even on the weekends or when his away on holidays. The loan process was smooth and I had no complications. The process with Andrew was again nice and easy, he took the time to find and put together the right package that was suited to my situation. I have recommended Andrew to my family & friends and everyone have been grateful and completely satisfied with his service.
Read more
S Wilko
September 23, 2024
I had not dealt with Scott or UNO before finding them on the internet. Even as an Australian citizen living and working overseas, I knew obtaining a loan would be difficult. However, Scott went above and beyond what I expected from a mortgage broker. I genuinely don’t think you could find another company that works as hard as they did to get my home loan approved. I cannot recommend them highly enough. Everyone I dealt with at UNO were extremely professional and helpful. If you are looking for a broker, you would be mad not to give them a go. Thanks to Scott Wilkinson, Dalby Bajwa, Jena Lasquite and Andrew Pacini. Shaun.
Read more
Shan Liao
September 3, 2024
I had an outstanding experience with Tian Liu. He was incredibly professional and attentive, going above and beyond to meet my needs. His expertise and dedication made the entire process smooth and stress-free. Tian's deep knowledge of the market and commitment to finding the best solutions for his clients truly sets him apart. He was always available to answer my questions and provided invaluable guidance throughout. I highly recommend Tian Liu to anyone in need of a reliable and skilled broker!"
Read more
Nathanael Chin
September 3, 2024
Tian Liu provided exceptional service throughout the entire process. His professionalism and keen attention to detail were evident from the start. Tian consistently kept us informed and offered insightful advice that made us feel confident in our decisions. He truly cares about his clients and works tirelessly to ensure the best possible outcome. We couldn't be happier with his assistance and highly recommend Tian to anyone looking for a trustworthy and knowledgeable broker.
Read more
Patrick Winters
August 14, 2024
For the past three years, it has been an absolute pleasure to work with Mike Parsons. He has consistently helped us navigate commercial property loans with skill and efficiency. Mike’s timely and professional responses to our inquiries have been invaluable. We have built a strong, reliable relationship with him and eagerly anticipate continuing our collaboration in the future. We highly recommend his services.
Read more
Lee Robibaro
August 6, 2024
I am so thankful and grateful to have Scott Wilkinson as my broker. He not only looked after me every step from start to finish he gave me confidence and I was able to trust him and his expertise. My children and I are now happy in our new home and very appreciative of Scott's help. I will definitely be only having Scott as my broker from here onward as there is no mucking around and straightforward answers. Thanks again
Read more
Steve Mav
August 6, 2024
Scott and the whole team at uno have been amazing. Super responsive and helped us achieve a result that we couldn’t have possibly achieved on our own.
Read more
Thien Pham
August 5, 2024
Scott, Dalby and Jena were awesome to work with for my recent Home Loan, they are responsive and knowledgeable - which helped ensure a smooth purchase from pre-approvals to settlement. This is the second property I've purchased with UNO as my mortgage broker and would definitely recommend their services. Thanks again to the UNO Team for the awesome support.
Read more
Scott Hutchinson
August 5, 2024
I am writing this summary in support of recommending Mike Parsons as a Mortgage Broker. At the time of writing this, I have known Mike for 4 years and he has executed 4 mortgages deals for me (including 2 refinances) over that time. Mike has provided me incredible service as a mortgage broker as follows : - Works painstakingly on getting the scenarios together to provide you options that optimize your position. - Works inordinate hours on the detail necessary to support the scenarios. - Mike keeps you updated on the status and progress of the applications and also helps you work through answering questions and any complexities that may arise. -In my cases, given the complexities and timings of my situations , these application processes would take many weeks to finalize . Mike never gave anything other than utter commitment and focus to getting the job done. Mike acts as a true business partner throughout this whole broker /mortgage journey. I simply would only go to Mike for any future dealings on getting a loan from a bank (and as will my kids in the future !) . There is no way a bank (I have seen anyway) would provide this kind of time nor service to a customer. You can rest assured that once Mike has done the deal, you have ended up with the most optimized position taking into account all the variables/scenarios in play. Scott Hutchinson
Read more
Jason Seam
August 5, 2024
I've worked with Scott Wilkinson for my last 2 properties and he's been excellent. He sourced multiple options and didn't push a specific bank, tailoring his recommendations to me based on my requirements. I was specifically requesting a "medico loan" and Scott could navigate that extra requirement with expertise. When I was initially working with Scott, I was also trialling 2 other brokers and neither of those 2 had the same breadth of lenders, or could provide the same deals. I've referred multiple buyers to Scott and his team; one of them said to me after working with him, "how'd you find this guy, he's so good compared to all the other broker's I've worked with!" I'm going into my next purchase with Scott as my broker partner again. I recommend him to everyone
Read more
Tina Anderson
July 29, 2024
My experience with Mortgage Broker - Scott Wilkinson, and his team - exceeded my expectations! I couldn’t be happier after settlement - in this current financial climate. He listened to what my requirements were in a loan and then devised a suitable plan for me moving forward. Which was something I didn’t think was possible to achieve. I strongly believe that Scott’s qualifications and previous experience in the Finance Sector - sets him apart from other Mortgage Brokers as he has more insight into the industry and the needs of the customer. Scott was professional, provided solid options, was timely with communication and gave great advice. I will definitely be using Scott’s services in the future and I highly recommend him to anyone as a Mortgage Broker.
Read more
Marlon Baena
July 22, 2024
Karis dedication to assisting with our home loan, even while I was on holidays, truly exemplifies a commitment to excellent service. It's the small things that often make a big difference, and it seems Karis attention to detail and clear communication were key to our smooth home purchase. I highly recommend using UNO and Karis for your home loan needs.
Read more