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- Self employed or can't provide past tax returns?? ...A lodoc loan maybe for you ...
Lodoc loans
Lo Doc loan are designed mainly for people who have some equity (or deposit) but who may have trouble showing evidence of their income levels. So if you are self employed or have irregular incomes, this might be the best option for you.
In the past lodoc loans had significantly higher interest rates than standard loans and therefore were generally only used as a lender of last resort. In recent years, the rates have moved down to the point where a number of lenders now offer these loans at standard interest rates.
Most lodoc lenders will allow a loan of up to 80% - 85% of the value of the property you provide as security. Some lenders may even allow up to 90% or 95% however interest rates are often higher in these situations.
For example - Jim might have $250,000 in deposit and may want to purchase a $1 million dollar property, but he may not be able to prove he earns enough money to afford the loan. Being self employed, Jim might have always earned a good income but may have been slow in getting tax returns done, or may receive income in lumps rather than consistently over the course of each year. This is where lodoc loans can help. There are lodoc lenders who may give Jim the ~$800,000 loan he needs and all Jim may need to provide might be a statement that he can afford the loan.
There are many different tiers and types of lodoc lenders in the market and which one is most suitable depends on your particular circumstances. Speak to us to find out.
Types of Lodocs
Self declared income
This is the most common type of lodoc and is where you sign a declaration stating to the the bank your annual income. It is considered "lodoc" because the lender is willing to provide you with a loan on the strength of this declaration and usually they will not require any other evidence of the income you have declared. You may be able to get an 80% lodoc loan up to around $1 million or more in some circumstances under such lodocs.
Account statement or Accountant letter
This type of lodoc is a little more strict in its income evidencing criteria however such lodocs may be most suitable in some situations where interest rate is more important. Also, some of the lenders that use "self declared income" may require an accountant's letter if the applicant is self employed for less that a minimum cut-off period ie 2 years.
Asset lend
This is probably the least stringent type of lodoc ie where the lender doesn’t require you to state any income at all. They also may not need to know about your current asset and liability position. Essentially, they are lending to you solely against the value of the property you are giving them as security for your loan. This may sound like the simplest and easiest option but the downside is that the % loan you can get on an asset lend is usually less than some of the other types of lodoc and/or the interest rate may be higher.
As you can see, the most suitable loan for you is dependent on your individual situation. We generally do not arrange large numbers of lodoc loans because our first preference is to see if we can achieve your goals through the normal lending routes (ie full doc loans). Only if this is not possible or desirable do we then assess the lodoc options for you.
Remember, our service is provided completely free to you so if you are looking to buy a home or investment property in the near future, we recommend the following.. Firstly, you can click on the following link to go to our online enquiry form. It only takes 5 minutes to complete and with this information we can assess your loan options. This is not a loan application and it's no obligation..... it just allows us to work out your loan capacity and inform you of what position you are in. Also, when we send you your assessment email, we'll also include parts 1 and 2 of our free Home Loan Advice Centre e-Course. The e-Course is a 35 page indepth guide that gives you all the information you need about buying property in Australia. It goes through the common methods of purchasing property and gives an indepth description of each stage in the entire home buying process. It's especially usefull to first home buyers. Click here to see a sample of what the e-Course contains (pdf opens in new window) |
For more information on this topic or any other topics please call Home Loan Advice Centre on 1300-729-177 or 02-9210-1000 or see the following links:
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