Bank of Melbourne Low Doc Portfolio Loan – Overview
The Bank of Melbourne Low Doc Portfolio Loan allows self-employed applicants the freedom to borrow funds without the requirement of providing a full 2 years of accountant-prepared taxation financial documents.
For borrowers with uneven incomes, or fluctuating cash flow due to seasonal business, it can be next to impossible trying to prove to a bank that they can afford a mortgage. Banks tend to want payslips, group certificates, or other verification to substantiate a regular amount of money coming into a household.
Yet, the availability of a Low Doc loan through the Bank of Melbourne helps self-employed people and business owners to by-pass the once-strict income verification policies. Simplified documentation requirements mean it’s suddenly easier to qualify for a mortgage.
Add to this the benefit of having access to a line of credit facility, and it’s easy to see why the Portfolio loan is such an ideal choice for business owners or self-employed borrowers.
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Low Doc Borrowing Requirements
There is no need for a borrower to supply a full 2 years of financials to qualify for a low doc loan. In fact, the loan assessors may only need to see evidence of being self-employed, or being a business owner, plus evidence of regular business turnover in order to effectively assess an application. Evidence of being able to responsibly meet previous or existing liability payments will also need to be provided.
These forms of evidence will include:
- Australian Business Number (ABN) or Australian Company Number (ACN)
- 12 months of Business Activity Statements (BAS)
- Statements showing the previous 6 months of regular repayments for any loans included in a refinance
- Statements showing the previous 6 months of regular repayments on any loans that will not be refinanced and remain current liabilities for the borrower.
Based on these simplified levels of documentation, self-employed borrowers may be able to qualify for the Bank of Melbourne Low Doc Portfolio Loan.
As with any credit application, a credit check will apply. Self-employed applicants with clean credit history may be considered as preferable to those with blemishes evident on their credit. It is advised to speak to a Bank of Melbourne lending representative regarding any credit problems, as there may be a level of discretion exercised when approving some customers.
How Much Can You Borrow?
In most cases, the Bank of Melbourne may allow Low Doc applicants to borrow up to 60% of the value of the property offered as security without the need for Lender’s Mortgage Insurance.
However, it is possible to borrow up to 80% of the security property value, but a Lender’s Mortgage Insurance premium will apply. The amount of LMI premium will depend heavily on the overall loan amount, so it may be wise to speak to a Bank of Melbourne lending representative about the estimated costs associated with LMI premiums.
What is a Portfolio Loan?
The Portfolio loan is the name given to the Bank of Melbourne line of credit. When used correctly, a Portfolio loan is the ideal tool for wealth building, investment portfolio creation and even rapid loan reduction.
The flexibility of this type of loan means that you only ever pay interest on the balance amount owing. This can be ideal for self-employed people with fluctuating income levels, as the Portfolio loan allows for income to be deposited into the account at any time to reduce the balance further, but can also redrawn at will, just like a regular transaction account.
Create Up to 10 Sub-Accounts
The incredible flexibility of a Portfolio Loan also means having the ability to create up to 10 sub-accounts that branch off from your primary line of credit account. In all cases, your primary account must remain on a variable rate. However, you are able to fix the interest rate on sub-accounts. This can offer a way to fix a portion of your mortgage, while using the variable portion for other needs.
Sub-accounts can be ideal for self-employed applicants who may want to keep certain funds separated from active business operating capital. For example, keeping the amounts aside for future GST payments can be left in one sub-account until the payment is due. This reduces the risk of spending that money until it is needed, but at the same time reduces the amount of interest payable on that portion of your loan.
You will receive individual statements for each sub-account, showing separate transactions and balances, as well as individual monthly interest payments incurred.
The minimum repayment amount due on a Portfolio Loan is the amount of interest accrued throughout the month. However, borrowers have the flexibility of making voluntary repayments at any time throughout the month on the variable rate loan. This can be done by transferring funds from another transaction account, or by depositing funds at a Bank of Melbourne branch.
On a fixed rate line of credit, additional payments may be limited to no more than $10,000 in any given year. Payments exceeding this amount on fixed rate Portfolio Loans may attract break fees.
For anyone with irregular income amounts, this level of flexibility can be ideal. Larger income amounts can remain on the line of credit until required, while a minimum monthly interest payment only is required to cover only the interest charges accrued on slow income months.
As the balance amount is reduced and the amount available to be redrawn increases, it is very possible to use those funds to purchase further investments. Redraw up to your original approved limit amount to purchase shares, or to be used as a deposit on a residential investment property, or for any other acceptable investment asset.
How Is Interest Calculated?
The interest payments on a Bank of Melbourne Low Doc Portfolio loan are calculated daily on the outstanding balance owing. The daily interest amounts are then capitalised onto the line of credit as one figure at the end of the month.
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The Low Doc Portfolio Loan is able to be used in much the same way as a regular transaction account. This means you’re able to access cash using EFTPOS, ATMs, phone banking, Internet banking, or through the branch network. Your cash card can be set up to connect to your Portfolio loan, or one of your sub-accounts, so that funds are easily accessible using your cash card the same way you normally would with any other transaction account.
Payments may also be made via a cheque book linked to the Portfolio Loan, or made online via BPAY payments. You can apply for a cheque book at the time of application, or ask at the branch to have one linked to your account.
Bank of Melbourne’s secure online banking website also offers safe, secure access to your accounts at any time of the day or night via Internet Banking. It’s possible to transfer funds between your own Bank of Melbourne transaction accounts, credit cards, or sub-accounts of your primary Portfolio loan very easily online. You may also use Internet Banking to pay anyone else directly to a bank account by entering a valid BSB and Account number.
Rates and Fees
See above for the current schedule of interest rates for Bank of Melbourne Low Doc Portfolio Loans is as follows:
These rates are subject to change without notice, so always check what the current interest rates may be at the time of application.
You will be charged $750 for the establishment of your loan, other legal fees may apply, you will also be charged $17 per sub-account per month or you can opt to pay an annual fee of $250 for all sub-accounts associated with this loan.
There is also a $100 fee for the creation of every sub-account associated with this loan with a maximum of ten sub-accounts able to be created for your needs.
Combining a Bank of Melbourne Low Doc Portfolio Loan with a Business Owner’s Loan Package
For low doc borrowers with a business to run, the Bank of Melbourne may allow you to combine a Low Doc Portfolio loan with a Business Owner’s Loan Package.
The Business Owner’s Loan Package may give you discounted establishment fees for your own business’s EFTPOS machine, as well as access to a specific business credit card. It’s also possible to add a Bank of Melbourne Business Transaction Account to the package and benefit from same-day settlement for any transactions made via EFTPOS on every day excluding Sunday.
Business owners can also benefit from receiving online business taxation advice or accountancy advice at no cost as part of this package.