Low Doc Property Lending: What Should You Know?

Borrowing loans has never been as easy as it is today. With flexible policies and a number of provisions offered by banks and other financial institutions, it has become easier for the people falling in different economic slabs to avail a loan for different purposes. One such loan that we will be discussing in this blog is the low doc property lending. These are also famously known as lite-doc or alt-doc loans. These loans are curated, especially for self-employed borrowers like contractors, freelancers, and people who don't have regular jobs.

Let's explore more about Low Doc Property Loans:

Applying for a normal loan would require you to submit many documents and ID proofs so that the bank can assess your credibility and eligibility before approving the loan. Unlike this, the low doc property lending doesn't require so much evidence. A few basic ones will solve the purpose. Here are some of the documents that you would need to show at the time of applying for a low doc property loan in Sydney:

1. Borrower's signed income declaration having details about the usual income

2. Letter from the borrower's accountant

3. 12 months’ Business Activity Statement

4. Registered business name and Australian Business Number

5. Last six month's bank statement

6. Old tax return

7. Provisional financial statement

These are some of the mandatory paperwork that one needs to do for low doc property loans, but here you must know that these policies may vary from lender to lender. Hence, it is always good to read the eligibility criteria before applying for a loan. One of the best ways to easily get the loan at the best rate would be to avail the services of a mortgage broker who excels in the field of low doc property loans in Sydney.

What should you be careful about?

If you are planning to apply for low doc property lending, then you must know that these loans have more restrictions as compared to the conventional loans, as it poses more risk to the lender. So, here are certain factors that you must have a look at while applying for a low doc property loan:

1. Maximum LVR:  Most of the lenders dealing in low doc property lending will accept up to 60% of the property value. Some will consider up to 80% LVR, and you will get only a few lenders offering 90% LVR.

2. Deposit: Most of the lenders will ask for 20% of the purchased price; however, if you search more rigorously, there is a possibility of you finding a lower percentage.

3. ABN registration: As we have mentioned above, the borrower is required to submit the Australian Business Registration Number. If you wish to get an LVR of 60% on your loan, then your ABN must be registered for more than a year so that you can prove your self-employed status.

4. Rate of interest: While searching for a loan, you must have a closer look at the interest rates offered by the banks. It’s always good to compare the rate of interest offered by different lenders and shortlist the best options as per your requirements.

5. Credit history: One of the factors that lenders will consider at the time of low doc property lending is your credit history. It is a mark of your financial health and will define your creditworthiness. Hence, you must have a closer look at your credit history before applying for a loan.

If you have taken a low doc property loan in Sydney, then there is a greater probability of you to shift it to full doc loans, but only if you have made the repayments on time and provided tax returns as proof of income.

Conclusion

With this information, you can now easily search for low doc property lending and apply for a loan. However, don't miss to take the above-mentioned pointers into consideration before applying for the same.