What you need to know about low documentation home loans

By the resi financial blog team, 23 August 2013

Information about low doc loan

If you're self-employed and are interested in taking out a home loan for property, you may be wondering what to do in lieu of having all the required paperwork and documents necessary for the application process.

For example, most people are required to bring in a number of documents when applying for a home loan, including evidence of consistent income and a certain degree of savings. This helps prove that they're a trustworthy and suitable candidate for the lender to help out.

Unfortunately, many self-employed Australians may not have a consistent income, or evidence of established savings, which could leave them at a disadvantage. However, there is a solution available in the form of a lo doc home loan.

Short for low documentation, a lo doc loan can be taken out by individuals who don’t have access to the required documentation needed for a normal home loan approval.

Due to the higher level of risk involved for the lender, these loans tend to have a higher interest rate than a normal home loan - although sometimes the more documentation you can provide, the lower this interest rate can drop.

Furthermore, a higher deposit is usually required for these loans, sometimes climbing up to 40 per cent of the overall property's value. Understandably, higher fees and compulsory mortgage insurance are also expected with most lo doc loans.

A lo doc loan owner who can later provide the required documentation can often have their home loan reassessed and lowered to the criteria and interest rate of a normal fixed or variable rate home loan.

All of these extra precautions are taken purely to secure the lender in the event that the loan falls through. Without all the usual paperwork to prove a home loan’s validity, it pays for lenders to take every step possible to ensure their investment goes through without a hitch.

Get in contact with the team at resi today to investigate both lo doc home loans and the best fixed interest rate home loans in Australia.

Categories: Home Loans