Self-employed or employed on contract? Income patterns not as regular as PAYE employees? Having difficulty convincing the bank you can service a loan?
A Low Documentation Loan can be set up whereby you "self-certify" your income. This avoids the trouble of asking your accountant to provide up-to-date financials every time you wish to borrow money. You may have some restrictions imposed, particularly in relation to the amount you can borrow against your property - but it can save you a lot of time and stress.
It is commonly accepted that the self-employed are more likely to have unpredictable incomes, or be affected by economic slumps, rising operating expenses, or market trends. That's why lenders typically want a business track record of at least two years of verifiable income for self-employed home loan applicants. These loans, with complete disclosure of financial information, known as Full Documentation loans, require you to provide personal and business taxation returns and ATO Notices of Assessment, Profit & Loss and Balance Sheet information, as generally completed by your accountant. If this information meets the serviceability requirements for the loan sought, you can access any lender’s full product suite, and thus obtain even 100% LVR (Loan to Valuation Ratio) loans.
Some lenders now enable self-employed applicants to provide only one year’s financials, thus allowing some applicants to qualify for a ‘Full Doc’ loan more easily than before. However, the nature of a self-employed person’s business means that being able to supply all the financial information required is not always easy to do, hence the use of Low Documentation (Lo Doc) loans has become more common in the market.
Generally you'll need a good credit history and have successfully operated your business for at least a year. This type of home loan is designed for people whose evidence of income is not readily available, and has an LVR of less than 80%. Although it is possible to secure home loans at the same competitive interest rates as for Full Doc loans, credit policy for Low Doc loans has become more restrictive recently and applicants will need to meet more complex requirements.
Contemporary developments in mortgage products have made it less difficult to find suitable loans for the self-employed. However, lenders still want safeguards in place since their risk with a self-employed home loan applicant is potentially greater.
Difficulty getting a loan?
A Lo Doc loan is an option for self-employed people.
Considering a Lo Doc loan?
Contact us for assistance.