Due to high interest rates, limited alternatives, and a small number of lenders willing to examine their loan application, self-employed individuals have always found themselves in a struggle when seeking a mortgage for their new home.
However, self-employed people have something to cheer about, as low-doc home loans become increasingly popular in the mortgage market, making it easier for them to enter the housing market.
What are low doc loans?
Due to the lack of traditional income verification methods such as pay slips and tax returns, lenders view self-employed borrowers as high-risk and are hesitant to lend to them. Low doc loans jump this hurdle by allowing borrowers to produce other accessible proofs of income, such as self-certified income statements and business activity statements, allowing contract workers and other self-employed individuals to get a mortgage.
What do you generally need to apply for a low doc loan?
Typically, a 20% deposit is required, but if that is not possible, a deposit of at least 10% of the purchase price is required. If you can't save the required 20% deposit for a home loan, then a low deposit home loan with a guarantor may be an alternative.
A valid ABN (the longer it has been running, the better). It also helps if your business is registered for goods and services tax.
Business activity statements (BAS) that have been lodged with the Australian Taxation Office (ATO).
Self-declaration paperwork, where the borrower states their taxable income. An Accountants Letter verifying that the income is correct is generally required.
Your personal and business bank statements may reveal the amount you have paid yourself in the previous year. This can give lenders good idea of how much money you make each year.
How are the interest rates on low doc loans?
Low doc loans may have higher interest rates compared traditional loans. However, low doc loan's interest rates might be quite comparable if your credit score is good, your deposit is substantial, and you can demonstrate solid cash flow. In addition, if the loan is for business, the interest may be tax deductible.
How can we help you get a low doc loan?
If you're considering a low-doc loan, speaking with one of our experienced finance advisors or mortgage brokers can be helpful. It helps if you have one of our expert brokers on your side because not all brokers are experienced in dealing with low doc loans. It's a good idea to enquire about our brokers' access to a specialised lender on their panel of lenders.
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