No doc home loans
No doc home loans are rare. Most borrowers are better off with low doc loans. But you can still get a home loan without having to provide the standard amount of proof of income.
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No doc home loans are loans that don't require documents that prove your income, such as payslips. Understandably, borrowers without proof of income are risky customers from a lender's perspective.
Today, no doc home loans are no longer offered by most Australian lenders. This includes the Big Four banks and most major lenders.
Many lenders offer low doc home loans, which require you to provide a limited form of income evidence. This is a better option for borrowers who can't certify their income using PAYG pay slips.
How do no doc home loans work?
If you can't establish your income and don't have alternative documentation then you can try to find a no doc loan. These loans are typically offered through small specialist lenders and private lenders.
This means the specific conditions of the loan depend on the lender in question. Some may require a credit check or ask you to sign a statement declaring you are able to repay the loan. If your loan is secured against a property then the lender will likely have criteria around the property you're buying, such as location, size and the condition of the building.
No doc loans aren't designed to be held for 30 years the same way a normal home loan is. Your loan may have a punishingly high interest rate and the lender may require you to create an exit plan showing how you intend to repay the loan.
Can I buy a residential home with a no doc loan?
It's harder to buy a home to live in with a no doc loan. By definition, no doc loans are for situations and borrowers who fall outside the regulations of the National Consumer Credit Protection (NCCP) Act 2009.
This means the loan must be:
- In the name of a company, not a person
- For business or investment purposes
- Secured by a commercial property
If you don't meet the criteria above then your loan will fall under the NCCP regulations and you will need a low doc loan or a regular home loan.
No doc versus low doc home loans
While similar, there are a few differences between low and no documentation loans. Both loan types are options for borrowers who don't have the common proof of income, such as regular payslips from PAYG income.
- Low doc loans. These loans allow borrowers to establish proof of income via alternative documents. This includes business activity statements, a signed letter from an accountant and a signed declaration of your income. You may need an ABN as well. Low doc loans have higher interest rates than regular home loans and usually require larger deposits. You can use a low doc loan to buy a residential property.
- No doc loans. If you can't provide any proof of your income at all then you'll need to look at no doc loans. Compared to low doc loans these loans have even higher interest rates and may require deposits of 40% or more. You may need to sign a declaration stating you are able to make repayments, but the lender won't ask for evidence in the form of documentation. It's harder to use a no doc loan to buy a residential property unless you fall outside the NCCP regulations.
If you need more help finding a low doc or now loan then it's a good idea to talk to a mortgage broker. They can offer you free, expert advice or point you in the direction of a specialist lender who can help.
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