All you need to know about Low Doc Building Loan

If you are a freelancer or self-employed, then availing loan can be a challenging task. To buy a property, you need to apply for a loan, but it also requires completing a lot of paperwork. To make the process simpler for self-employed and freelancers, there is a low doc building loan provision which requires less paperwork and faster loan approval. This blog aims at highlighting few important aspects of this loan.

Documentation for low doc loan:

If you are applying for a low doc building loan, then you need to have certain documents, these includes:

• Income declaration of the borrower
• Registered business name
• ABN – Australian Business Name
• 12-month business activity statement also known as BAS
• Proof confirming you are registered for GST for minimum 12 months and more

Once you have submitted all these documents, the bank will verify the same. After successful verification, the bank will approve your loan application. Remember, timely repayment of the loan is important as it will eventually impact your credit score. 

Eligibility for low doc loan:

Although low doc building loans are easy to apply, you have to adhere to the edibility parameters. These include the following:

• Proof showing that you had been working in the same industry for the past 1 year. Some lenders may require 2 years.
• No other mortgage on the current property
• A clean credit history, no defaulters will be entertained
• You can avail 80% of the total amount on the property and if you do not want Lender’s Mortgage Insurance (LMI) you will be eligible for 60% of the total amount of the property
• Property Valuation details

Choosing the right low doc building loan:

When you start your search to apply for the low doc building loan, you will come across many lenders offering the same. The following segment highlights what are some of the key parameters that you need to consider:

Compare the loan- Since there are so many lenders, you have to compare the loan rate, fees and other charges before making a final call. 

Flexible repayments- The best factor that you need to take into account is flexible repayment. Many lenders offer the provision of weekly, fortnightly, or monthly repayments. Some lenders also offer option to make extra payments to reduce the principle amount or reduce the no of months by making extra payments.

Redraw facility- In case your cash flow is unstable or varies, then a loan that offers a redraw feature will be helpful. The redraw facility will allow you to withdraw additional repayments.

Higher interest rate: there are lenders offering lower interest rate too but they ask you to submit many documents and based on those document's they will verify if you are eligible. The lender with higher interest rate ask for minimum documents and the chances or loan approval are higher.

LMI lenders mortgage insurance allows you to take up to 80% of the value of the house as loan and if you do not want to opt for Lenders Mortgage Insurance you can take up to 60% of the value of the house as loan.

Conclusion

Keep in mind that the declared income should match your age and experience. For e.g. a 20 year old cannot show an income of 250,000, he will be straight away rejected and chances that the lender may report the person to the authorities suspecting black money. This was the basic information about the low doc building loan. There are different lenders offering this loan. In case you are planning to apply for this loan, follow the above-mentioned guidelines. 

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