No doc home loans no longer exist, but you can still get a home loan without having to provide the standard amount of proof of income.
No doc home loans are no longer offered in Australia following the global financial crisis. However, there are still options for borrowers who can't certify their income using PAYG pay slips.
Instead, many lenders offer low doc home loans, which require you to provide a limited form of income evidence.
What were no doc home loans?
No doc home loans allowed borrowers to obtain finance without providing proof of income. Following the global financial crisis, lenders no longer offered these loans. This was due to the inherent risk involved. However, low doc loans still exist in Australia. These loans, sometimes called alt doc loans, allow borrowers to provide alternative forms of income verification.
How do low doc home loans work?
As the name suggests, low doc home loans are different to full documentation loans because they don’t require borrowers to supply the same financial information about their income when applying. The information you’ll have to supply to take out a low doc home loan can vary from one lender to the next, but typically it will include a signed declaration of your income, tax returns and Business Activity Statements.
However, the downside of a low doc home loan is that without having seen sufficient proof of your income, banks will view you as posing a higher risk of being unable to pay your loan back. As a result, low doc loans tend to attract higher interest rates and extra fees.