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Low doc home loans require less paperwork, and could offer an easier way for freelancers, contractors and other self employed Australians to join the property market. Compare low doc mortgage deals that may better suit your needs than more typical home loans.

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Mark Bristow

Updated on

24 Nov, 2024

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What is a low-doc home loan?

Low-doc home loans get their name from requiring less supporting documentation compared to other home loans. In other words, you can apply for a low-documentation loan without providing the same kind of paperwork as a more traditional full-doc loan. Because you often use alternative paperwork to apply for these loans, they are sometimes also known as alt-doc loans.

Until low-doc home loans came along, getting access to a mortgage was difficult for non-traditional borrowers, who may not be able to provide payslips, PAYG payment summaries or group certificates to mortgage lenders. What low-doc loans do is allow self-employed Australians, freelancers and small business owners to provide different kinds of proof of income documentation when applying for a home loan.

How much documentation is required for a low-doc loan?

Although they may require less documentation than standard home loans, low-doc home loans still require sufficient proof that you will be able to service the mortgage repayments.

There's no hard and fast answer to exactly how much documentation you'll need, but it will ultimately depend on the strength of your documentation in proving your income and financial position.

If you're interested in learning more about what this might mean for your personal circumstances, consider reaching out to a mortgage broker.

Are there no-doc home loans in Australia?

With a no-doc home loan, you may not need to provide any standard proof of income documents. Instead, you may need to sign a statement of your assets and liabilities or a declaration that you can afford the loan, and you’ll need to have sufficient deposit or equity available in the property to secure the loan.

While this sounds like an incredibly fast and convenient way to apply for a loan, it’s not the case. Given the high risk these loans carry, no-doc home loans are extremely rare in Australia and are generally not offered by many banks, credit unions or other mortgage lenders. Also, they’re often unregulated, and may be limited in their uses (e.g. only for commercial or investment purposes).

None of the major Australian financial institutions offer no-doc home loans, although there may be some smaller private lenders in the market who do offer no-doc home loans. If you opt for a no-doc home loan from a smaller lender, always do your research to make sure you’re getting a good deal from a lender you can trust.

Before you decide on a no-doc home loan, consider your low-doc home loan options first. Low-doc home loans require less documentation than standard home loans and tend to have lower interest rates and fewer fees and conditions than no-doc home loans.

Who are low-doc home loans for?

Low-doc home loans are generally designed for self-employed borrowers who have saved a deposit and earn sufficient income to afford a mortgage, but may not have the standard documentation available to prove it.

This may include:

Self-employed people
Small business owners
Freelancers
Sole traders
Contract workers
Seasonal workers
Casual workers
Professional investors
People with bad credit
Recent arrivals to Australia

With the number of self-employed borrowers on the rise, the increasing demand for low-doc home loans means there are a lot more options available for non-traditional borrowers. With low-doc home loans now available from all sorts of lenders, it’s important to compare your options and find the best low-doc home loan for you.

Does low-doc automatically mean high rate?

As self-employed borrowers generally don’t look as solid on paper as more traditional employees with pay slips, banks and lenders will often insist borrowers pay a larger deposit for low-doc loans, and some low-doc home loans may have higher interest rates than traditional financial products. Having an excellent credit history can also help to maximise your available options.

What do I need to apply for a low-doc home loan?

While each low-doc home loan lender will have their own terms and conditions, some of the documents that self-employed borrowers may need to provide include:

a signed Borrower’s Income Declaration stating your usual income;
a registered business name;
evidence of Australian Business Number (ABN) registration;
evidence of GST registration;
personal tax returns;
business activity statements (BAS);
profit and loss statements;
business bank statements;
other relevant financial statements, and/or;
an accountant’s letter verifying their financial position.

Can I refinance with a low-doc home loan?

Refinancing with a low-doc home loan is possible, though the process may be more complex than refinancing a full doc home loan.

Much like applying for a low-doc home loan, the lender you’re refinancing with will likely want to see some proof of income to confirm that you can afford the mortgage repayments. They may also pay close attention to your credit history, and may prefer that you hold more equity in your property compared to your loan amount, giving you a lower loan to value ratio (LVR).

How to compare low-doc home loans

Low-doc home loans have come a long way in recent years. With many options on the market, there’s no such thing as a one-size-fits-all low-doc home loan. Some lenders may offer specific low-doc home loans, while others may offer low-doc versions of their regular home loan products. With so many options on the market, it can be hard to know how to compare low-doc home loans. RateCity's home loan comparison tables can make it easier to compare your options.

Here’s what to look out for when comparing low-doc home loans:

Interest rate

Looking at a home loan’s interest rate is often a good place to start your mortgage comparison. Depending on the low-doc home loan, you may have the option of choosing either fixed or variable interest rates.

A fixed-rate option will allow you to set the interest rate for a period, giving you the certainty of making consistent repayments for a fixed term. However, you may not be able to easily refinance your loan during this time without incurring break costs.

Your other option is to pick the variable rate and wear the risk that rates may rise, which will make your repayments more expensive. Though it’s also possible that interest rates could fall in the future, which could let your enjoy some repayment relief.

Some low-doc home loans also offer a split rate option which lets you split part of your loan between both a fixed and a variable interest rate. This could let you benefit from some stability and also some flexibility.

It's also important to consider the loan's comparison rate, which combines the cost of interest with standard fees and charges into a single percentage figure. This can allow you to quickly compare the overall cost of different home loans.

How much will a home loan cost you?

Type of loan

When you apply for a home loan, you’ll typically need to pay back the principal amount you borrow, plus the interest charges. Some low-doc loans may offer an interest-only option, which lets you pay back the minimum amount of interest and not the principal for a fixed period. However, this can often result in paying more in total over the life of the loan, as you won't be making a dent in the borrowed amount. Principal and interest repayments, on the other hand, allow you to gradually work towards paying off your loan.

Loan features

When comparing low-doc home loans, it’s important to look beyond the interest rate. The interest rate is an important factor to consider and compare, but there are many other aspects to weigh up, such as:

Extra repayments

You might want a loan that allows you to make extra repayments. If you’re self-employed or freelancing, there may be times when you’re earning more, and you may want to use the extra cash to pay down your home loan. A loan that lets you pay extra into your home loan may help to ultimately reduce the amount of interest you pay over the life of the loan. Bear in mind that some loans may charge a small fee for this feature.

Redraw facility

If your cash flow is unstable or varies throughout the year, a loan which offers a redraw feature may help buffer any ebbs and flows. A redraw facility allows you to withdraw any additional repayments you’ve made into your home loan. As low-doc home loans generally tend to have lower interest rates than credit cards and some personal loans, it may sometimes make more financial sense to use the redraw facility than applying for a personal loan.

Offset Account

If you have savings or any extra cash sitting in a bank account, you might want to consider a low-doc home loan with an offset account. An offset account that’s attached to your home loan may help save you interest and potentially shave years off your loan.

For example, if you have a $500,000 home loan and a balance of $40,000 in an offset account, you’ll only be charged interest on the balance of $460,000. The amount in your offset account is offset against the loan balance, potentially saving you interest and money over the life of the loan.

Offset accounts are more likely to be available with variable interest rate low-doc home loans, so before you apply, do your research to find a loan that suits your needs.

Other features to consider

Given that low-doc home loans are generally riskier from a lender’s perspective, the bank or credit provider may require a bigger deposit than a full-doc home loan.

When you’re comparing low-doc home loans, look out for the loan-to-value ratio (LVR) percentages. Loans that have a LVR of over 80% – in other words, where you need to provide a 20% deposit or equity – are generally required to pay lenders mortgage insurance (LMI). To avoid any extra charges, take note of the LVR and deposit requirements.

Another low-doc home loan feature you could look out for is loan portability, which lets you take your low-doc home loan with you when you move, instead of refinancing. This could potentially be a useful feature if you’re not certain of how long you’ll be staying at your current property.

Depending on your cash flow, you may be able to find a loan that lets you change your repayments from monthly to weekly or fortnightly. This could better suit your household budget, plus the more frequent repayments could potentially help you pay off the property a little bit faster and save you some money.

How do I apply for a low-doc loan in Australia?

Once you've done your research, applying for a low-doc home loan should be a similar process to a standard home loan application. The biggest difference may be the documents you need to provide the lender with your application. Consider using the following steps to help guide you through the application process:

Compare your options: RateCity's comparison tools, such as our comparison rate table, home loan calculators, and Real Time Ratings™ system, can make it easier for you to narrow down your search and create a shortlist of products that suit your needs.
Check the lending criteria: Once you’ve compared your low-doc home loan options and found a loan that suits your needs, it's important to check that you meet the eligibility requirements.
Prepare your documents: You will need to gather your documentation before you apply. While each lender has their own home loan application process, they may generally require some or all of the following documents:
- Proof of identification
- Proof you’ve been working in the same industry for at least 12 months
- A registered business name and an ABN
- At least 12 months of lodged business activity statements (BAS statements)
- Proof of registration of GST
- Personal and business bank statements
- An income declaration from your accountant
Apply for pre-approval: This is where a lender agrees in principle to provide a loan, but you or the lender can still walk away. It can be a good step to take before you get serious about shopping for a property.
Make an offer on a property:Whether you’re buying at auction or by private treaty, it's important to make sure the price is within your budget.
Credit check and valuation: The lender will check your credit score (based on your history of managing money) and calculate the value of the property to make sure you aren't over-borrowing.
Application approval:If you’re successful, you'll then sign the formal home loan offer and contract.
Prepare for settlement:This final step is the legal transfer of the property from one owner to another. A solicitor or conveyancer can help confirm that this process goes smoothly.

Can a mortgage broker help me apply for a low-doc home loan?

If you're not sure whether a low-doc home loan will be the best option for your financial situation, you may choose to seek the help of a mortgage broker. These home loan experts can look at your personal finances and help you estimate your home loan repayments based on your loan term, interest rate, property value and more.

Mortgage brokers can often be particularly helpful for borrowers who are applying for a low-doc home loan, as this kind of home loan can have tighter lending criteria. They may also be able to help you access low-doc loan options that may not be widely advertised.

Brokers can help you to compare home loan products, and even negotiate with banks and non-bank lenders to help you get a better offer. Finally, a broker can help manage your home loan application, handling the paperwork to help avoid any hold-ups in the mortgage approval process.

Georgia Brown

Personal Finance Editor

Georgia Brown was a Personal Finance Editor and journalist for RateCity, covering the scope of finance in Australia over loans, credit, mortgage and housing, superannuation, and sustainable finance, to name a few. Before venturing into personal finance, she worked as a reporter for Smart Property Investment, Real Estate Business, and REA's realestate.com.au, and these days her work can be seen across numerous publications, including Lifehacker and RateCity.

This article was reviewed by Personal Finance Editor Mark Bristow before it was published as part of RateCity's Fact Check process.

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^Words such as "top", "best", "cheapest" or "lowest" are not a recommendation or rating of products. This page compares a range of products from selected providers and not all products or providers are included in the comparison. There is no such thing as a 'one- size-fits-all' financial product. The best loan, credit card, superannuation account or bank account for you might not be the best choice for someone else. Before selecting any financial product you should read the fine print carefully, including the product disclosure statement, target market determination fact sheet or terms and conditions document and obtain professional financial advice on whether a product is right for you and your finances.

What is a low-doc home loan?

How to compare low-doc home loans

Here’s what to look out for when comparing low-doc home loans:

How do I apply for a low-doc loan in Australia?

Compare your options: RateCity's comparison tools, such as our comparison rate table, home loan calculators, and Real Time Ratings™ system, can make it easier for you to narrow down your search and create a shortlist of products that suit your needs.
Check the lending criteria: Once you’ve compared your low-doc home loan options and found a loan that suits your needs, it's important to check that you meet the eligibility requirements.
Prepare your documents: You will need to gather your documentation before you apply. While each lender has their own home loan application process, they may generally require some or all of the following documents:
- Proof of identification
- Proof you’ve been working in the same industry for at least 12 months
- A registered business name and an ABN
- At least 12 months of lodged business activity statements (BAS statements)
- Proof of registration of GST
- Personal and business bank statements
- An income declaration from your accountant
Apply for pre-approval: This is where a lender agrees in principle to provide a loan, but you or the lender can still walk away. It can be a good step to take before you get serious about shopping for a property.
Make an offer on a property:Whether you’re buying at auction or by private treaty, it's important to make sure the price is within your budget.
Credit check and valuation: The lender will check your credit score (based on your history of managing money) and calculate the value of the property to make sure you aren't over-borrowing.
Application approval:If you’re successful, you'll then sign the formal home loan offer and contract.
Prepare for settlement:This final step is the legal transfer of the property from one owner to another. A solicitor or conveyancer can help confirm that this process goes smoothly.

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What is a low-doc home loan?