The low-down on 'Low Doc' home loans

Understanding Low Doc Loans


What is a low doc home loan?

A low documentation (low doc) home loan is a mortgage that can be taken out using different income verification documentation to that required by a full documentation (full doc) home loan.

If you're unable to get payslips or up-to-date tax returns, then a ‘Low Doc’ home loan may suit you better than a more traditional loan, or what’s called a ‘Full Doc’ loan.

These are often used by self-employed borrowers, who may find it difficult to provide conventional proof of income.

What’s in a name? Low Doc vs Alt Doc home loans

A low doc loan used to be referred to as a mortgage that could be taken out using minimal documentation. Following the global financial crisis and subsequent tightening up of mortgage lending criteria, today’s low doc loans work a little differently. 

The introduction of National consumer credit regulations in 2009 doesn’t allow lenders to lend to a customer unless they have complied with the lender’s responsible lending obligations. Which means that every loan has to pass a serviceability assessment that ensures borrowers are in a position to manage their loan repayments, and not to create hardship.

As a result, low doc loans now look much like standard full documentation loans, with the main difference being the documentation or evidence used as proof of the borrower’s income, to meet the lender’s credit assessment criteria.

At Pepper, we don’t offer Low Doc loans. Instead we offer alternative documentation loans (Alt Doc) and we individually assess each loan application thoroughly, carrying out just as much due diligence with our Alt Doc loans as we do with our Full Doc loans. It is not about providing less or a low amount of income documentation, but more about providing alternative documentation for evidence of your income.

What interest rates are charged on low doc loans?

Low doc loans are not commonly available in Australia, due to responsible lending laws.

What documents can I use for Alt Doc home loans?

What documents can you use to prove your income? Pepper’s Alt Doc loans consider many different forms of evidence. For self-employed borrowers, this may include:

  • Evidence of ABN registration for 6 months
  • Evidence of GST registration for 6 months
  • A declaration of financial position plus one of the following:
    6 months business bank statements (inclusive of last 1 month) or 6 months business activity statements (BAS).

Of course, different home loan products will require different levels of supporting documentation. For this reason, the best thing to do is to talk to us on 137 377. We’ll go through the income verification documents you do have, talk to you about what the options are and work with you to find a home loan that meets your needs.

Does Pepper Money offer a ‘No Doc’ home loan?

No, we don’t. As a responsible lender, we have a duty of care to you as our customer. Pepper strictly complies with the regulations prescribed by the National Consumer Credit Protection Act (NCCP). While still keeping to these regulations, we can still offer you a number of flexible Alt Doc loan options. They allow you to provide alternative methods of verifying your income to help you get a loan.

How Pepper Money may be able to help

Without Alt Doc loans, many self-employed people might not be able to buy their own home, invest in property or even invest in business growth. Pepper Money’s Alt Doc home loan refinance option may allow self-employed borrowers to consolidate business debt, pay out outstanding tax debts to help free up cash flow or even obtain cash for business purposes, provided Pepper can be satisfied that your application otherwise complies with its normal credit assessment and that the loan meets your needs.

Want to learn more? Speak to one of our friendly Lending Specialists by calling 137 377. Alternatively, to get an estimate of how much you could borrow with Pepper Money try our borrowing power calculator today.

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