September 06, 2016
Low-Doc Home Loans
As a Self-Employed businessperson (irrespective of whether you are a Sole Trader, Partnership, Trust or Company), getting a home loan approved by a bank requires you to have two years of business financial records and personal tax returns that show evidence of a steady income.
So what happens if you are the type of person who stores all their records in a shoebox and have not completed your previous years’ financials & tax returns?
Or if you are a self-employed person with wildly fluctuating incomes or one who has a clever accountant who has used strategies to lower your taxable income, which can work against you in a mortgage application? What to know more? fill out the form on this page to book an appointment.
There are two options available to you to such circumstances
Firstly, you can put your home buying or refinancing plans on hold for two years until you have sufficient business financial records that will positively confirm to a lender that your income can stand the test of time.
Planning ahead is important. You will need a good deposit and show a steady income. You must maintain regular business records that show that you on top of your GST, BAS and Superannuation commitments; and that you will still have surplus net income to service the debt.
The second option is to see if you would qualify for a “low-doc” home loan. With this special type of loan, you will not need to supply as many documents to prove your income, assets and liabilities as you would with a full-doc loan. Low Doc home loans are often perceived as higher risk by the lenders, because the income of the borrower cannot be substantiated by conventional means. As a result, these loans may be more expensive than standard mortgages in terms of the interest rates, fees charged and maximum loan amount available to be borrowed.
At the minimum, you will need to factor in the following conditions when considering a low-doc home loan:
1. You must have a clear credit history.
2. You must demonstrate that you will retain at least 20 per cent equity in the security (although some lenders may require more).
3. You may be required to prove that you have had a registered ABN for a certain period of time.
4. You may be required to submit recent Business Activity Statements (BAS) and/or your Business account transaction statements.
5. You may be required to provide recent Profit & Loss statements generated from your management accounting system, or complete an Income/Affordability declaration form signed by yourself and your accountant.
Not all banks and lenders will provide low-doc home loans, so it pays to check with our office first for your available options. Furthermore, low-doc home loans are generally mortgage insured – however lenders will not absorb the cost of the mortgage insurance premium in all situations.
In most cases, these loans are available for a property purchase as well as if you are looking to refinance your existing loan or to borrow additional funds to renovate your existing home.
As final word of caution, before you take out a low-doc loan, it is essential that you make sure that you have made a realistic self-assessment of the long-term affordability to repay the loan on a regular basis.
Please call us today on 8342 5688 or mobile 0421 206543 to discuss your low doc options further. Or simply fill out the form on this page to arrange an appointment.