The Truth About Low Doc Loans

Understanding Low Doc Loans

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’ 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

Once upon a time, a low doc loan was just that: a mortgage that could be taken out using minimal documentation. However, following the global financial crisis and subsequent tightening up of lending criteria, today’s low doc loans look very different to their ancestors.

The introduction of National consumer credit regulations in 2009 was a sea change in how low doc loans work. One of the key requirements of these regulations is that a lender cannot lend to a customer unless they have complied with the lender’s responsible lending obligations.
Every loan has to pass a ‘not unsuitable’ test that ensures borrowers are in a position to manage their loan repayments. As a result, low doc loans now look much like standard full documentation loans, with the main difference being the documentation or evidence used to satisfy the lender’s loan suitability and credit assessment criteria, including proof of a borrower’s income.
That’s why Pepper doesn’t use the term ‘low doc’ in relation to any of its loans. Our equivalent loans are called Alt Doc loans (or alternative documentation loans) and we offer Alt Doc versions of many of our home loan. Pepper individually assesses each loan application thoroughly, carrying out just as much due diligence with our Alt Doc loans as we do with our Full Doc loans.

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 or 24 months (depending on loan).
  • Evidence of GST registration for 6 or 12 months (depending on loan).
  • A declaration of financial position plus one of the following:
    • 6 months business bank statements.
    • 6 months Business Activity Statements (BAS).
    • Pepper's Accountants Letter

Does Pepper offer a ‘No Doc’ 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 loan options. They allow you to provide alternative methods of verifying your income to help you get a loan.

Providing an important service

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’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? If you’re interested in finding out more about Pepper Money home loan, speak to one of our Lending Specialists on 13 73 77, or leave your details and we’ll call you back.

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