Who needs a low documentation home loan?

Low doc home loans are designed for self-employed Australians who may not be able to provide the documentation that’s required to apply for a typical home loan. While low doc home loans can help some Australians purchase property, they may also have risks to consider before applying. 

What’s the difference between a standard home loan and a low doc home loan? 

When you apply for a home loan, the lender will require you to provide proof of your identity, income, expenses and more to confirm that you can afford the repayments without too much risk of ending up in financial stress. 

One of the simplest ways to prove this is to supply payslips issued by your employer, which detail your ongoing and annual income. 

However, if you are self-employed, a freelancer, a contractor, or otherwise aren’t paid regular income by an employer, you may not be able to provide the documents a lender normally requires for a standard home loan. 

It’s still possible for these borrowers to successfully apply for a mortgage, but they may need to consider a low doc home loan. Because low doc home loans require different documentation than typical mortgages, they are sometimes called alt doc home loans.

Who can use a low doc home loan?

Any Australian working in a field where you aren’t paid a regular salary or wage by an employer may be able to use a low doc home loan to buy property. 

This may include (but is not limited to):

• Tradies
• Small business owners
• Sole traders
• Freelancers
• Contractors
• Musicians
• DJs
• Artists
• Actors
• Models
• Investors

What do you need to provide for a low doc home loan?

Despite the name, a low doc home loan doesn’t always mean less paperwork. Sometimes you’ll need to provide several alternative documents to help prove your income and expenses to a lender in place of a payslip. 

Depending on the lender, these may include: 

• Recent business activity statements (BAS)
• Self-verified income declaration
• Your ABN and/or registered business name
• Bank statements/business bank statements
• GST registration details
• A letter from your accountant to verify your finances
• Details of your other assets and liabilities
• Proof you’ve worked in your job/industry for a minimum length of time

What else is required for low doc home loans?

Borrowers often place tighter eligibility criteria on low doc home loans, to help offset the extra financial risk that comes from lending to a borrower who may have a less secure income. 

While different lenders manage low doc home loans differently, you may encounter: 

• Lower LVR/higher deposit requirements: You may be required to pay a deposit/hold equity of more than 20 per cent of the property value, potentially 30 or even 40 per cent, or to pay Lender’s Mortgage Insurance (LMI). 
• Higher interest rates
• Higher fees 
• Fewer features and benefits

Also, keep in mind that there may be fewer low doc home loan options to compare, from a smaller range of lenders compared to more typical home loans. 

If you’re not sure if a low doc home loan may be right for you, or if you need help comparing mortgage options and organising the necessary paperwork, a mortgage broker may be able to provide the personal assistance you want.

Compare home loans in Australia