Lo-document loans
Many lenders offer alternatives for self-employed people and others without traditional proof of income.
One option is a simple, finance product called a lo-document loan or lo-doc loan for short. This sort of loan is for mainly for self-employed borrowers who cannot provide full financial statements and other evidence of income.
With the global financial crisis these sort of products are getting harder to obtain. Most lenders require lo-doc applicants to take out lenders’ mortgage insurance when borrowing up to 80 per cent of the property value. Most lenders also charge a higher interest rate for these products. These rates may be reduced after a certain time frame or when you are able to provide evidence of income.
In summary
- less paperwork – requires self-certification instead of traditional proof of income
- streamlined application process
- can only borrow up to 80 per cent of property value
- interest rate discounts may apply after specific time period
- may be eligible for lower interest rate if able to supply tax returns at a later date
- requires clean credit history
- lenders may not lend in high risk areas such as inner city high-rises or large rural allotments
- generally higher interest rates with less features than a traditional loan
- may require lender’s mortgage insurance, adding to cost of loan
