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No doc home loans
No doc home loans – where you get approved for a mortgage without providing evidence of income – are no longer an option for ordinary Australian borrowers..
Australian lenders no longer offer no doc home loans. Low doc home loans may be a suitable alternative for some borrowers.
What are (or were) no doc home loans?
When you apply for a home loan, lenders require documents which prove things like your income, savings and spending. No doc home loans were loans which did not require any documentation. They had higher interest rates and looser lending requirements, meaning borrowers could get these loans even without pay slips, tax returns or bank statements.
Obviously this is a risky lending scenario. However many borrowers can't provide things like pay slips, particularly as self-employed borrowers or business owners.
Although lenders today don't offer no doc loans to home buyers or property investors, they do offer low doc (or alt doc loans). This is where borrowers can apply for a home loan with different documentation.
How did no doc home loans work?
No doc home loans were an option for borrowers who couldn't provide evidence of their income (such as with payslips) and who also lacked alternative documentation (such as an accountant's letter or business activity statement).
With no doc loans, lenders conducted a credit check and a property valuation, and may have only required the borrower to sign a statement declaring they are able to repay the loan.
No doc loans weren't designed to be held for 30 years like other mortgages. These loans had higher rates. Lenders often required the borrower to create an exit plan showing how they intended to repay the loan.
The borrower was expected to refinance to a normal home loan after building up a more traditional proof of income.
Finder survey: Do Australians of different ages use a mortgage broker to help choose a low-deposit loan?
Response
45-54 yrs
35-44 yrs
25-34 yrs
18-24 yrs
No
1.45%
1.18%
1.46%
Yes
0.48%
3.54%
3.4%
5.71%
Source: Finder survey by Pure Profile of 1112 Australians, December 2023
Can you still buy a residential home with a no doc loan?
To qualify for a no doc loan that falls outside the NCCP regulations, the loan must be:
In the name of a company, not a person
For business or investment purposes
Secured against 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 vs low doc 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 pay slips from PAYG income.
Low doc 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 generally have higher interest rates than regular home loans, and usually require larger home loan deposits. You can use a low doc loan to buy a residential property.
Is it hard to apply for a low doc loan?
Low doc loans aren't necessarily difficult to apply for, but it does limit where you can get your home loan. Specialist lenders are more likely to approve you for a home loan with low documentation. You'll also find that the interest rates are higher. Typically, these lenders encourage shorter loan terms so that you can use this time to build up equity and evidence of being a good borrower, so you can move on to a standard home loan.
If you need more help finding a low doc then it could be 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 your unique situation.
How much deposit do I need for a low doc home loan?
Typically, you can still get a loan for a 20% deposit. Many low doc lenders will also accept lender's mortgage insurance, allowing you to take out a loan with a smaller deposit. The lender will assess your documentation and impose LVR caps if necessary.
Richard Whitten is a money editor at Finder, and has been covering home loans, property and personal finance for 6+ years. He has written for Yahoo Finance, Money Magazine and Homely; and has appeared on various radio shows nationwide. He holds a Certificate IV in mortgage broking and finance (RG 206), a Tier 1 Generic Knowledge certification and a Tier 2 General Advice Deposit Products (RG 146) certification.
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Thank you for your question and for contacting Finder.
Basically, the difference between a no doc home loan and a regular home loan is that the no doc home loans are available to borrowers who struggle to provide any proof of financial information about their income when applying. Though there are lenders who offer no doc home loans, they are only a few in Australia.
So in case you have been accepted for a no doc home loan, there might be difficulties in moving to a full documentation regular home loan as most likely you will be asked to submit your financial information like proof of income, assets, other liabilities, etc. Nonetheless, please note that your approval for a regular home loan would vary from lender to lender, so it’s best to get in touch with the lender first to discuss your chances of approval before you submit your application. Alternatively, you can also speak with a mortgage broker who will take your circumstances into account and can offer you a range of lending options.
I have a bad credit rating due to an unpaid, disputed mastdeposit, mastercard bill. if I have 40,000 deposit saved, how much could I borrow on a low doc loan, and what would the repayments be over 15 years ?? thank you
There are lenders who will consider you for a home loan when you have a bad credit rating. Many lenders offer low doc home loans that require you to provide a limited form of income evidence.
If you need more help finding a low doc or a no-doc home loan, I recommend getting in touch with a licensed mortgage broker that can help you understand your financial position and can leverage their panel of networks to find a lender that’s more inclined to review your application.
I would like to know if there is a reputable lender who will approve a loan to purchase a home with no documentation of proof of income. However, I have recently sold a home and have money in the bank. Thanks for your anticipated assistance.
All reputable lenders require some kind of documentation to assess your borrowing position.
If you have trouble finding a home loan, you may want to speak to a mortgage broker. A broker can help you understand your financial position and they can leverage their panel of networks to find a lender that is more inclined to review your application.
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Can a no doc loan moves to normal loans?
Hi Violets,
Thank you for your question and for contacting Finder.
Basically, the difference between a no doc home loan and a regular home loan is that the no doc home loans are available to borrowers who struggle to provide any proof of financial information about their income when applying. Though there are lenders who offer no doc home loans, they are only a few in Australia.
So in case you have been accepted for a no doc home loan, there might be difficulties in moving to a full documentation regular home loan as most likely you will be asked to submit your financial information like proof of income, assets, other liabilities, etc. Nonetheless, please note that your approval for a regular home loan would vary from lender to lender, so it’s best to get in touch with the lender first to discuss your chances of approval before you submit your application. Alternatively, you can also speak with a mortgage broker who will take your circumstances into account and can offer you a range of lending options.
Cheers,
May
I have a bad credit rating due to an unpaid, disputed mastdeposit, mastercard bill. if I have 40,000 deposit saved, how much could I borrow on a low doc loan, and what would the repayments be over 15 years ?? thank you
Hi Greg,
Thanks for your question.
There are lenders who will consider you for a home loan when you have a bad credit rating. Many lenders offer low doc home loans that require you to provide a limited form of income evidence.
If you need more help finding a low doc or a no-doc home loan, I recommend getting in touch with a licensed mortgage broker that can help you understand your financial position and can leverage their panel of networks to find a lender that’s more inclined to review your application.
Cheers,
Shirley
I would like to know if there is a reputable lender who will approve a loan to purchase a home with no documentation of proof of income. However, I have recently sold a home and have money in the bank. Thanks for your anticipated assistance.
Hi Vivian,
Thanks for your question.
All reputable lenders require some kind of documentation to assess your borrowing position.
If you have trouble finding a home loan, you may want to speak to a mortgage broker. A broker can help you understand your financial position and they can leverage their panel of networks to find a lender that is more inclined to review your application.
Cheers,
Shirley