Lo Doc Home Loans
Lo Doc Home Loans are suited to those borrowers who are
not in a position to provide the necessary documentation
which would be needed for a standard home loan, but who
are none-the-less in a financial position in which they
could indeed afford the home loan. Instead of providing
the standard documentation needed, the borrower completes
self-certification in which they declare that they will
be able to service the loan. Lo Doc Home Loans are thus
most commonly used by self-employed borrowers.
We offer a wide range of lenders who offer lo doc home loans.
Introduction
Lo Doc Home Loans can help borrowers who may otherwise not
have been able to get a home loan to purchase property.
Since the borrower is providing the lender with a lower
level of security, interest rates generally reflect this
increased risk. The extent to which the interest rate is
loaded is also significantly reflected by how much equity
the borrower will have in their property at the time of
purchase. In recent year Lo Doc Home Loans have become more
competitive and many products now are comparable to standard
home loans in terms of their interest rates, account facilities
etc.
At a glance, Lo Doc Home Loans bear the following characteristics:
- Less Paperwork: With Lo Doc Home Loans the borrower
provide a letter in which they make a declaration that they
will be able to meet their financial commitments, rather
than providing the traditional paperwork such as payslips,
tax returns and financial reports.
- Lenders' Mortgage Insurance: This usually sets in much
sooner for Lo Doc Home Loans, and so the borrower needs
to have a larger deposit if they want to avoid this. If
Lenders' Mortgage Insurance is applicable to the loan,
then this can significantly add to the cost of the loan.
- Interest rates may at first be somewhat higher when compared
with a standard loan, although it is possible to bring
this into line with standrd home loans, once the borrower
has a history of meeting repayments on time, and as the
borrower's own equity in their property increases.
- There may be more restrictions in terms of what kinds of property will be accepted as security by the lender (high-rises and rural properties etc.)
There are three basic categories of lo doc home loans. Generally the biggest difference between each of the categories is the interest rate being offered and the exact level of evidence required.
1. Self Declared Income: The borrower submits a self-certification in which they declare their current income. These kinds of lo doc home loans do attract a higher interest rate when compared with standard home loans.
2. Account Statement: Generally more evidence is required
than for the Self Declared Income, such as a letter from
the borrower's accountant. Interest rates on these kinds
of loans are generally more in line with standard home loans.
3. Asset lend: Of the three kinds of Lo Doc Home Loans this
type requires the least documentations, with the loan being
almost entirely secured by the property itself. This is
a significant risk for the lender, and as such, interest
rates can be significantly higher than standard home loans.
Costs and Features
Certain Lo Doc Home Loans are very competitive when compared
with standard home loans in terms of the interest rate being
offered, and others can be significantly more expensive
than standard home loans. In the end it all comes down to
how much risk the lender will take on by offering a certain
loan.
The actual application fees for Lo Doc Home Loans are generally
comparable with standard home loans. Features such as redraw,
split loans etc. are generally also available as with other
full documentation loans.