Low doc loans

Also called “Stated Income Loans” or simply “Lo Doc Loans” this style of loan is becoming a lot more popular in recent times especially among self-employed persons but are also available to PAYG wage earners.

All the normal requirements for a loan are the same as your usual loan application, but it is not necessary to provide two years’ business and personal tax returns, or pay slips and group certificates.

The applicant signs an Income Declaration Form which states an earned income amount. The loan products are usually exactly the same as the conventional loans but usually attract an additional loading on the interest rate. Although the loading is only for one to two years, and then it will revert to the conventional loan rates as long as no repayments have been missed.

Some banks at the moment now require L.M.I. for all loans greater than 60% LV.R. The other differences of the Lo Doc loans are that all the banks and non-bank lenders are definitely more discerning as to which areas they will accept a security property in. As a rule of thumb, they require a minimum 10,000 population within an active real estate market. However, all banks and mortgage insurers have their own particular restrictions.

There can also be restrictions on properties with two or more dwellings on the one title. With the Lo Doc loans, the banks/lenders do not have a sense of humour if there have been any adverse notations on the applicant’s C.R.A.A. (credit reference report). Similarly, if the applicant’s current loan statements show any missed payments and/or late payment fees and charges they regard these misdemeanours very seriously. They will initially ask for a written explanation and if they are not satisfied with that, they will not accept the loan.

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