However, do you know that lenders are increasingly getting wary of low doc loans? According to APRA statistics, after the National Consumer Credit Protection Act 2009 was introduced in 2010, ‘low doc’ loans have declined from 6.4% to 0.7% of new residential loans by Authorised Deposit-taking Institutions (ADIs).
Low-doc loans are loans that require lesser paperwork to establish your credit history and repayment capacity. A boon for the self-employed, investors and persons with low credit score, it requires minimal proofs in form of self-certified income statements or business activity statements (BAS), instead of regular pay slips.
Sadly, greater restrictions are being placed over these loans since the past 12 months.
1. Being a higher risk to financial institutions and facing a stricter stance from APRA, borrowing is being restricted to 80% LVR, and 60% LVR for those who cannot produce BAS. This also means that these loans may not be covered by Lenders mortgage insurance (LMI).
2. Bigger deposits and higher interest rates: Many lenders are asking for 20% of the purchase price as deposit for a low-doc loan. Further, they charge high interest rates on low-doc loans. However, with increasing fluidity in the mortgage market, some lenders are coming up with deals that are as low on interest charge outs as traditional loans. HashChing brings to you the best of these deals at the click of a mouse!
Keeping in mind the tougher procedures for approval being employed by lenders, below housekeeping tips can increase your chances of getting a loan:
1. Try to build up a deposit of at least 10% of the purchase price;
2. Ensure that you lodge your BAS; and
3. If applicable, register your business for goods and sales tax.
Though on a decline, low-doc loans make mortgage accessible to many Australians who are not eligible for traditional loans. Considering the variations in the market, it is a good idea to contact an expert to clear your doubts. Don’t hesitate to pose your queries to our mortgage experts for free advice within a day!
HashChing’s verified partner brokers can give you multiple options on low doc home loans. They can also negotiate even further on your behalf and save you further at no cost to you. So, if you’re looking for a new home loan or refinancing options for your existing loan, explore HashChing for multiple low doc home loan deals, that can save you thousands of dollars conveniently. So why not , and let our verified brokers guide you.