Low Doc Loan: How Much Can I Borrow?
Non-bank lenders such as Mortgage House pioneered the low doc loan in the 1990s. For several decades, small business owners, contractors, and freelancers found it difficult to become homeowners through a traditional mortgage. To figure out how much you can borrow as a low doc loan applicant, we offer a few key points. Low Doc Loan Parameters A traditional mortgage requires a 20% down payment and full financial documentation including bank statements, payslips, and employment confirmation. The low doc mortgage makes an exception on the documents. Lenders verify every mortgage applicant’s ability to repay the debt. Check out our mortgage repayment calculator. If savings history and employment aren’t available, lenders request alternative pieces of information. Instead, there are trade-offs. For example, some lenders request a deposit above 20%. The average low doc mortgage covers 60% of the property’s appraised value. Lenders may approve 80% of the appraised property’s value for applicants who provide a high deposit or collateral. If the applicant procures a signator, it improves their position. A lender may approve 90% of the property’s value. Low Doc Loan Interest Rate The low doc mortgage carries more risk. Therefore the lender includes a higher interest rate in their offer. When the average interest rate is 3% for a traditional mortgage, the low doc loan can carry a 5% interest rate. Low Doc Loan Conclusion The low doc loan helps self-employed individuals become homeowners. It also helps small business owners and others who cannot provide full financial documentation. For more information, contact our loan specialists at Mortgage House.
Struggling to Get Started with a Home Loan?
Many parents in Australia who own their homes are watching their children struggle to find the funds to purchase their first home in the sky-high property market. These days, reaching the generally required 20% deposit for a first home, especially in the big cities where a 20% deposit can exceed $100,000, can sometimes seem like an unachievable task. At Mortgage House, we offer various ways to help first home buyers get into the property market without breaking the bank. Family Equity – “Family Pledge” Loans You may be able to help your children, siblings or even parents buy their first home if you have sufficient equity in your own home or investment property. Usually, lenders require a 20% deposit, plus stamp duty and legal costs, but with a Family Pledge loan, a first home buyer could borrow up to 100% of their chosen property value. The Family Pledge loan can make it easy for an immediate family member (parent, child or sibling) to use the equity in their home as security to guarantee all or part of a first home buyers mortgage, allowing them to help out without needing to lend cash. This loan is available for those with the means to pay their monthly repayments but lack the sufficient funds to meet both the required deposit and associated costs (such as stamp duty and legal fees). Most lenders require the guarantor to be an Australian Resident aged between 18 and 65, with strong equity in their homes and a great credit score. Advantages Get into the property market sooner without the need to save a 20% deposit Helping a close family member get into the property market without needing to lend cash Once the borrower has 20% equity in their home, they can refinance without the need for LMI (Lenders Mortgage Insurance) and can relinquish the guarantor from your mortgage Disadvantages Financial trust is needed from the guarantor that the borrower will repay their mortgage sufficiently Family member’s property is used as collateral should you fail to meet repayments Not everyone has the equity they need in their own home to act as security against a family member’s property, so we can offer other paths for first time buyers to achieve their property goals. Low deposit home loans Few lenders allow you to borrow 100% of the purchase price, but low or no deposit home loans are a great way to get into the property market for the first time. Advantages Get into the property market sooner without the need to save a 20% deposit Stop wasting money on rent A chance to build a healthy credit rating A chance to create more wealth and build equity for future purchases Disadvantages Higher interest rates than those with a 20% deposit LMI – Lenders Mortgage Insurance – is an extra expense that is typically required A reliable income, steady job and good credit rating are needed to meet most low deposit loan requirements Other ways created to help first home buyers get into the property market include: The First Home Super Saver Scheme (FHSS) This scheme, introduced in 2017, allows prospective buyers to voluntarily contribute money to their super fund, and when the time is right, the saved money can be withdrawn. This can save you money in tax deductions, and can even accrue earnings through investments your superfund makes! The First Home Buyers Grant With the First Home Buyers grant, it can be cheaper to build a new home as opposed to buying an existing property. The scheme varies from state to state, but can offer a grant of up to $20,000, and a reduction or even exemption from transfer duty, providing substantial savings. At Mortgage House, we’re no strangers to the homeowner’s journey. It’s a long (but rewarding) one. If you’re thinking of buying a home, you can contact us for advice about the best options for you when it comes to your mortgage. There are many considerations to make when buying your first property, and it’s a good idea to do your research before you commit to taking a specific path. Our calculators can help you plan to get on track when saving for a deposit, and discover your potential mortgage repayments! Contact Us