The Self-Employed and/or Contractors are usually perfectly capable in servicing a home loan, even though they can’t satisfy the traditional bank lending criteria.
The main reason to use a low doc loan is because you cannot prove your true income. For example:
• You may not have up to date tax returns.
• Your income may have increased since your last tax return.
• You may have large deductions such as depreciation which are not a real expense.
• Your company structure may be too complex.
• You may have distributed income to family members from your trust.
Some other businesses such as restaurants, taxi services, tradesmen or retail outlets receive most of their income as cash which doesn’t show up in their tax returns. Obviously if they were to show their tax returns to the lender then they would be declined as their income would appear too low to service the debt.
This is why a LOW DOC HOME LOAN may suit you as it doesn’t require the same level of “documentation” as normal loans. As with any mortgage application, you must still prove that your income outstrips your spending and you can service the loan.
You will need to hold a current ABN and be trading for minimum of 12 months
You will also need one of the following as income verification;
• Accountants declaration letter, or
• 12 months BAS, or
• 6 months trading statement
Clean credit history or credit impaired clients are ok.
Who can get a Low Doc Loan?
As your broker we have access to specialised lenders who will take the applicants individual circumstances into account and tailor the right product with the best interest rate by placing some extra rules on Loan-to-Value Ratios (LVR) and Insurance requirements.
Self-employed borrowers are normally required to have a valid ABN that has been running for at least 12 months and is registered for GST. Some lenders will now accept ABNs that have been registered for just 1 day.
Some of our specialist lenders can consider lending more than 80% of the property value and can consider borrowers who have had defaults or other black marks on their credit file.
What is an Income Declaration Form?
An Income Declaration Form is a method for the banks to verify your income when applying for a low doc loan.
Typically, the form will ask you to state your name, your business’s name, your business’s ABN, the amount you are borrowing and the indicative repayments. At the bottom of the form is usually a declaration confirming that you believe that the income you are stating is true and that you can afford to make the loan repayments.
Every lender has their own Low Doc Declaration, so it may vary. Some lenders will also ask you to verify your assets and liabilities, while others have a no doc option that will allow you to not even declare an income or anything about your asset position.
Contact us today to discuss your options, you may want to refinance for cash out or buy a new home. Do not let your employment status or financial documentation deter you from getting a Home Loan