Low Doc Construction Loans

Low Doc Construction Loans

 

Must be constructed by licensed builder.

 

Documents needed:-

Accountant’s declaration

Building contract or construction tender

Stamped council approved plans

Project Specifications and schedule of finishes

Construction certificate  or building permit

Builder’s insurance

Builder’s risk insurance

Builder’s public risk insurance

 

For multi units:-

Low Doc development funding

 

Low Doc loans for yellow goods

Just released.

Low doc loans for yellow goods.

No financials

No BAS

No accountants letter

No trading statements.

Must have clean credit and be for business use.

Includes, fork lifts and materials handling, excavators, diggers, skid steer loaders, trailers, tankers and earth moving equipment.

Similar criteria to low doc car loans:-

To qualify for these low doc yellow goods loans the excavator must be purchased from a licensed dealer.

Low Doc loans for yellow goods – property owner – NO DEPOSIT LOAN

  • Maximum low doc loan amount (including,insurances etc) of $100,000
  • New and used vehicles up to four (4) years old
  • Supplied via a licensed dealership (no private sales)
  • No negative equity to be financed
  • ABN held and gst registered for a minimum of 24 months by applicant (in acceptable industry)
  • Verified property owner with equity
  • Satisfactory Credit Report on applicant and guarantors
  • Standard rates, terms and residuals/balloons to apply
  • Total exposure for all low doc car loans to be less than $250,000*
  • Must be Australian resident.

Low Doc loans for yellow goods – non property owner

  • Maximum low doc loan amount ( insurances etc) of $70,000 after deposit
  • Minimum 30 percent deposit required on all loans
  • New and used vehicles up to four (4) years old
  • Supplied via a licensed dealership (no private sales)
  • No negative equity to be financed
  • ABN held and gst registered for a minimum of 24 months by applicant (in acceptable industry)
  • Satisfactory Credit report on applicant and guarantors
  • Standard rates, terms and residuals/balloons to apply
  • Total exposure for all low doc car loans must be less than $250,000*
  • Must be Australian resident.

Please note this low doc loans product is only available for commercial clients where bona fide business use can be verified.

 

Interest rates

Low Doc Home Loans interest rates.

Interest rates for low doc home loans can and do vary widely.

Currently there are three year fixed rates starting from 5.57% (CR 6.11%).  This low doc home loan is available through non bank channels. It is generally in line with normal home loan rates. Remember, you cannot walk into one of the big four banks and get this loan.

For Low Doc home loans, normally, if the LVR is 60% or less then the interest rate for  low doc home loans is similar to or the same as normal home loan rates. When the LVR starts to increase or there is some form of credit impairment that the spread between low doc home loans and normal home loans will start to widen.

Having said that, be careful in regards to which low doc home loan lender you go with. Lenders generally have the right to vary interest rates even after the low doc home loan has started.

There may be a perception that by going though one of the big four banks you will get a good low doc home loan rate.

however, the Commonwealth Bank (CBA) has recently advised its broker network to contact their low doc home loan customers to advise them that the bank will be raising the interest rates for some existing low doc home loans customers by 0.25%

CBA has said that it would be writing to all its existing low doc home customers with loans that were funded before 1 April 2012 to advise them interest rates will be lifted unilaterally. This means even though other rates are falling the rates for low doc home loans customers will increase mid December 2012

How significant is this move for low doc borrowers?

Well, to put things in perspective  it is believed that CBA currently has over $5 billion, yes $5 billion worth of low doc home loans on its books.

 

 

 

The future of Low Doc Loans

It is now common knowledge that the low doc loans of old have gone. Previously if you had an ABN,  had a 20% deposit, and completed a self-certified income declaration then it was fairly simple to get a low doc loan.

As the low doc market matured many of the major banks were lending at interest rates the same as or similar to normal full document home loans. This scenario could not last as it did not take into account the risk profile of low doc loans.

With the advent of the GFC and responsible lending low doc loans changed. This was a change for the better. What it did mean was income was now verified to a higher degree than previously.

This didn’t mean a return to full tax returns. It did mean alternative ways were looked at in substantiating income.

These generally include one of the following:-

  • a letter from your accountant  For many small businesses that use an accountant, who better knows their business circumstances than their regular accountant.
  • 12 months BAS statements  These statements give a good indication as to how the business is actually travelling. Given they are done every three months they are also timely.
  • 6 months business bank trading statements showing the income coming into the business. These statement show the inflows and out flows of the entity generating the income.

The alternative ways of assessing income, including the insistence of two years abn and gst registration by most lenders now mean that income verified under low doc loans is more thorough.

Having the abn and gst registration for two years shows the business is ongoing.

There are commentators that predicted the demise of low doc loans for many years. At this stage they have been proved wrong.

Low doc loans are and always will be a part of the home loan market. Many low doc loans are still be written and this shows no sign of changing.

A lot of  pundits forget that many of Australia’s small businesses are Australia’s wealth generators!

 

 

Low Doc Loans 70

A Low Doc Loan with a maximum LVR of 70% and NO Lenders mortgage insurance and a cheap interest rate.

Low doc Loans requirements

  • Minimum – 24 months trading
  • Minimum – 24 months Business registration
  • Minimum – 24 months registration for BAS

What documents do you need to provide for this low doc loan?

  • A signed 12 months Profit and Loss account done via the Management Accounts of the Business (MYOB – does not need to be signed by an Accountant), and this can be done for any 12 month period (but no older than 6 months old)
  • BAS for the same 12 month period, this is used to confirm sales in the Profit and Loss etc.
  • Any other income sources (spouses PAYG, rental statements etc).
  • The last date of the Profit and Loss can not be more than 6 months old.  If this is the case will also require BAS to bring us up to date from the last date of the P&L.

How is serviceability calculated for this low doc loan?

  1. Total Net Profit shown in the profit and loss account, plus
  2. Add backs if any (interest on accounts being refinanced etc) shown in the Profit and Loss, plus
  3. Wages from the Group Certificate, plus
  4. Any other income

What do you get?

  • Up to 70% LVR against any residential property with no maximum amount loan size
  • Can be used for any purpose – purchases, refinances, debt consolidation and cash out (cash out max is $1.0m)
  • Products include Variable, Fixed Rates or Professional Package
  • NO Lenders Mortgage Insurance
  • A low doc loan at a cheap interest rate

It is important to note The Profit and Loss does not have to coincide with a financial year.   Just require a 12 month profit and loss for any 12 month period

Here is a low doc loans example:-

Business commences just over two years ago.  For the first full financial year, business was in a start up phase and made a loss. This is normal  For the last 12 months, business has gone strongly.  Under this product there is not an averaging of figures, we are taking the latter profit figures produced.  You can supply a signed Profit and Loss for the last 12 months (where you will be showing the majority profit) plus BAS for the same period + any other income.

All the above is a guide only. All low doc loans are subject to a lenders credit criteria.

Need more help call us on 1300 LOW DOC

 

Low Doc Loans cash out

Low Doc Loans cash out. New Low doc Laon Product will allow up to $250,000 cash out.

Product Highlights include;

• Maximum LVR of 75%;
• Maximum loan size $1m;
• Security must be in a Category 1 location and must have a building on it. (No vacant land);
• 12 months ABN – Supported by Accountants Declaration
• No Defaults, Mortgage Arrears or Bankrupt History;
• ATO debts ok;
• Non performing unsecured debts ok;
• Unlimited debt consolidation;
• Access to generous cash out (amounts up to $250k with stated purpose only / over $250k the borrower will need to supply a Stat Dec outlining purpose of funds).

Want to know more call us:-

1300 LOW DOC      1300 569 362

Hurry, is your low doc loan rate below 6%?

Low Doc Loans rates are moving up as predicted. The interest rates for fixed low doc loans and variable low doc loans are heading up.

Since the beginning of 2012 we have seen the rate for low doc loans start to get more expensive. If you currently have a low doc loan and your rate is above 6% please call us on 1300 LOW DOC. Hurry this rate for low doc loan refinances will not last long.

Update March 2012

Both low doc loans refinance and low doc loans purchase are still available with no application fee and no monthly fee up to 60%

The rates for low doc loans have now continued to move up. The 5.99% interest rate has now gone. If you are still quick you still may be able to lock in a rate below 6.1%

Remember these low doc loans require no BAS and no accountants letter. However, 12 months business bank trading statements is needed to show strong income.

Hurry

Call us on 1300 LOW DOC

Business Car Loans

Interest rates for low doc loans for cars have been again reduced.  The rates have been reduced by another .25% This lowering of the rates is good news for small business owners. For all low doc car loans the vehicle must be used for business or commercial use.

To qualify for these low doc loans for cars the applicant must be either a sole trader, partnership or company. The small business owner must be ABN and gst registered for a minimum of two years. If you are a property owner it may be possible to do a vehicle no deposit low doc loan. For full details see page on Low Doc car Loans.

Commercial Low Doc Loans

Everyone is now aware low doc loans are definitely harder to get than a few years ago. Having said that, as people become used to the new credit environment, we are now seeing customers start to offer BAS statements. This didn’t occur previously.

It seems people are now being conditioned by the banks that more paperwork is required when applying for low doc loans. The normal options are either Accountants letter, BAS statements, or trading statements. This extra paperwork applies to residential property low doc loans which are governed by the NCCP.

In regards to commercial low doc loans, in many cases we don’t require all this extra paperwork. We have recently been offered access to funding large low doc commercial loans with a minimum loan size of $3m. As well as the large low doc commercial loans there is now development finance becoming available for deals that the banks wont do.

As always, if you have a scenario regarding low doc commercial loans please call us.

 

Low Doc Loans with no BAS

Low Doc Loans with No BAS and no accountants letter are still available. For this low doc loan an ABN for two years and gst registration for one year is required.

These low doc loans will require twelve months trading statements for the self employed entity that is generating the income.

Currently there is no application fee, no ongoing fee and no early repayment fee with these low doc loans.

Why are you being asked for bank trading statements for the business entity generating the income?

Because under the new NCCP  legislation we must make reasonable enquiries to verify a borrower’s financial situation and objectives.

As well as self certification, lenders have been asking for supporting information, such as:
• bank statements
• cash flow forecasts
• wages/income verification
• accountants verification, etc

For this particular loan BAS are not required. Instead, the bank trading statements are needed to show income going through the business entity.

 

 

Accountants verification only

As everyone is now aware, all residential lending is now governed under NCCP. This can only be a good thing going forward, as it will lead to even more responsible lending. Contrary, to what some media commentators are saying Low Doc Loans are not dead. The whole principal of lending is that borrowers should be able to repay their loan comfortably.

So what does this mean for low doc loans? It means any low doc loan must now be verified in one of three ways. Either bank trading statements, BAS or an accountant’s sign off only. Of these three, we have found the third option is the most popular. This makes sense, as many accountants have known their customers for a long time and are intimate with their businesses. So, if you are looking for a low doc loan, and have an accountant that is able to sign off on your declared income, please call us on 1300 LOW DOC

New funding available for low doc loans

Low Doc Construction Loans

There is no question that funding for low doc loans has tightened. Having said that, to compensate for that tightening, during the month of September we have seen new sources of funding become available. We now have access to a new 65% product for low doc construction loans in the Sydney metropolitan area. It does not include credit impaired low doc loans.

Note:- Construction cannot have commenced

Development finance funding guidelines are as follows:-

Development Funding

Lender can consider funding for multi dwelling developments to a maximum amount of $5 million.

Basic criteria:

  • Funding to lower of 80% of total development costs or 65% of Gross Realisation Value (both exclusive of GST)
  • Fixed price building contract with registered builder, (the borrower can be the builder),
  • Loan advanced progressively on a cost to complete basis against Valuer and Quantity Surveyor inspection reports.
  • Interest capitalized within loan term
  • Construction loan terms from 12 – 24 months. (interest only)
  • Ongoing residual stock finance (take-out funding) considered on a case by case basis.
  • Pre-sale requirements considered on a case by case basis.**

** No pre-sale requirements for developments falling within below criteria:

  • up to 6 units.
  • loans up to $1.5 million.

Below is a list of questions / information requirements which will assist in determining if a development scenario falls within the lendrs acceptance criteria:

 

  • summary of the scenario (loan amount requested)
  • Location of the security: actual street address
  • Structure of the borrowing entity: trust, company individual etc (have sponsors undertaken developments in the past?)
  • “As is” value i.e. Land purchase price / current market value
  • Amount owing on the land if it is already held by the client
  • What is the client building: no of units, is DA held? etc
  • “On completion” value i.e. value of the property(s) upon completion of construction
  • Will they be strata titled or held in one line;
  • Value of the fixed price building contract
  • Details of licensed builder (web site? / details of similar type construction projects undertaken)
  • Exit strategy: do they plan to sell or retain (are there any pre-sales in place?)
  • If they plan to retain – what is estimated market rental return
  • Does the client have any CRA issues
  • Any additional strengths or potential issues we should know about up front.

 

If you require a low doc construction loan, please call us for a competitive estimate on 1300 LOW DOC

Large Low Doc Loans

Large low doc loans are still available.  Many lenders are now capping out their maximum low doc loan amount at $1 million. There is still funding for large million dollar low doc loans above this figure. As a guide you are looking at 1% set up costs and a normal investment home loan rate. Maximum 60% LVR and sound residential security. Cash out available in certain circumstances. Ideal for purchasing or refinancing prestige property.

Updated March 2012

Large Low Doc loans are still available up to $1.5m in major metro areas. If you are looking for a jumbo low doc loan over $2m then these may be available however they are discretionary. The applicant needs to have clean credit, have a strong asset and income position. BAS are not required and neither is an accountants letter. What is required is evidence of strong bank trading statements for the last 12 months.

The maximum LVR is up to 60% of the property value, with a lower LVR being preferred.

Please call us on 1300 LOW DOC     1300 569 362

 

Low Doc Construction Loans

Low doc Construction loans are still available for building residential homes in major metropolitan areas. An interest only low doc loan during construction.

At 60%, can be done at or near normal home loan rates.  The applicant must be an individual and there cannot be more than one building constructed.

A Low Doc Loan Construction at 80% can also be done, however there will be a slight loading due to the extra risk.

It is preferable to have stamped council approved plans and specifications, however if required the land only may be settled first.

Builder must be a major licensed major builder, have builders insurance and applicant must have clean credit.

For both of  these types of low doc loan need 2 years ABN and registered for GST. No BAS or trading statements required.

Building will be inspected at each stage of progressive drawdowns.

Call 1300 LOW DOC ( 1300 569 362) now to see if you qualify.

Westpac Low Doc Loans

Low Doc Loans LVR change.

Westpac

The maximum LVR on Westpac Low Doc Loans will be reduced from 82% to 80%, effective Wednesday 20 January 2010.

This change will also apply to existing customers that have low doc loans that need to be re-originated as a result of a top up.

If a customer pays the mortgage insurance separately (or upfront) the total low doc loan amount will still be 80%

RAMS

RAMS Low Doc Loans will be a maximum of 80% including mortgage insurance from Thursday 21st January 2010

As a footnote to the above, Westpac and many of the major banks are now requiring BAS statements with their low doc loans. Given this requirement for BAS, is this really a low doc loan? There are still alternative low doc lenders out there at 80% for both purchases and refinances that do not need BAS.

Difference between Low Doc Loans and No Doc Loans

What’s the difference? As a guide

Low Doc Loans can be on either owner occupied, or investment properties.
They require an income declaration.
Should have an ABN for 2 years and be registered for GST.
A normal LVR is 60% without mortgage insurance, and 80% with mortgage insurance.
Rates on low doc loans are either at, or near home loan rates.
Normally a term loan of 25-30 years.

No Doc Loans

Must be on investment properties.
Do not require an income declaration, however will still need Assets and Liabilities position.
Do not require ABN or GST registration.
Normal LVR is 65%, however in some cases can go to 80%.
Rates are priced according to risk and are more expensive than low doc loans.
No Doc Loans are normally short term up to 3 years, however in some cases it is possible to go out to 25 years.

The above is a guide only and can change at any time.

Westpac low doc loans rise .45%

Westpac low doc loans rise .45% after RBA only moved .25%. This move by Westpac is proof that banks do and will move low doc loan rates as they please. Often we hear from low doc loan customers that they are concerned the non banks may be more expensive.

This move by Westpac clearly dispels that argument.

Treasurer, Wayne Swan has been less than impressed with Westpac’s extra rate increase!

St George Low Doc Loans will go up  .39%

Citibank Low Doc Loans to increase .39%

CBA low doc loans will rise by .37%.

ANZ low doc loans to go up .35%

Bankwest low doc loans move .35%

RBA Interest Rates for 2009/2010/2011/2012/2013

The rate for low doc loans is partly driven by RBA interest movements.

RBA interest rates are normally set when the bank meets on the first Tuesday of each month, except January.

2009

RBA interest rates for 2009

• Tuesday, 3 February 2009 rates        decrease 1%
• Tuesday, 3 March 2009                    No change
• Tuesday, 7 April 2009 rates              decrease .25%
• Tuesday, 5 May 2009                       No change
• Tuesday, 2 June 2009                       No change
• Tuesday, 7 July 2009                        No change
• Tuesday, 4 August 2009                    No change
• Tuesday, 1 September 2009              No change
• Tuesday, 6 October 2009 rates          increase .25%
• Tuesday, 3 November 2009 rates       increase .25%
• Tuesday, 1 December 2009 rates       increase .25%

At the RBA meetings, when they move their rates, the variable rates for low doc loans normally move as well. Having said that, the major banks can, and do move their rates when and how much they want.

As a guide, and a guide only, you can expect the variable rate for most low doc loans to sit between 2 and 3% above the current RBA cash rate target.

2010

RBA interest rates for 2010

• Tuesday, 2 February 2010 rates on hold
• Tuesday, 2 March 2010 rates       increase .25%
• Tuesday, 6 April 2010 rates          increase .25%
• Tuesday, 4 May 2010 rates          increase .25%
• Tuesday, 1 June 2010                  No change
• Tuesday, 6 July 2010                   No change
• Tuesday, 3 August 2010               No change
• Tuesday, 2 September 2010         No change
• Tuesday, 5 October 2010             No change
• Tuesday, 2 November 2010          increase .25%
• Tuesday, 7 December 2010          No change

2011

In 2011, at the RBA meetings, the bank has set the rates as follows:-

RBA interest rates for 2011

• Tuesday, 1 February 2011          No change
• Tuesday, 1 March 2011              No change
• Tuesday, 5 April 2011                 No change
• Tuesday, 3 May 2011                 No change
• Tuesday, 7 June 2011                No change
• Tuesday, 5 July 2011                 No change
• Tuesday, 2 August 2011             No change
• Tuesday, 6 September 2011       No change
• Tuesday, 4 October 2011           No change
• Tuesday, 1 November 2011        decrease .25%
• Tuesday, 6 December 2011        decrease .25%

2012

• Tuesday, 2 February 2012          No change
• Tuesday, 6 March 2012              No change
• Tuesday, 3 April 2012               No change
• Tuesday, 1 May 2012               decrease .5%
• Tuesday, 5 June 2012              decrease .25%
• Tuesday, 3 July 2012               No change
• Tuesday, 8 August2012           No change
• Tuesday, 4 September 2012     No change
• Tuesday, 2 October2012         decrease .25%
• Tuesday, 6 November 2012     No change
• Tuesday, 4 December2012         decrease .25%

2013

• Tuesday, 5 February 2013           No change
• Tuesday, 5 March 2013               No change
• Tuesday, 2 April 2013                  No change
• Tuesday, 7 May 2013                  decrease .25%   
• Tuesday, 4 June 2013                 No change
• Tuesday, 2 July 2013                   No change
• Tuesday, 6 August 2013              decrease .25%
• Tuesday, 3 September 2013
• Tuesday, 1 October 2013
• Tuesday, 5 November 2013
• Tuesday, 3 December 2013

The current RBA cash rate target is 2.5%

Low Doc Loan variable rates rise again

The four major banks, CBA low doc loans, ANZ low doc loans, Westpac low doc loans, and St George low doc loans have all passed on the rate rise again, meaning the variable rates for low doc loans have risen by at least .25% again. This is on top of the .25% increase that occurred on Tuesday October 6 2009. Low doc loans have risen a total of .5% in the last two months. The next meeting of the Reserve bank is due for Tuesday December 1 2009. A media release normally occurs at about 2.30pm.

As the bank does not normally meet in January, the next meeting for the RBA after December 1 should 2 February 2010

Low Doc with credit default

With  banks and mortgage insurers, it is becoming more difficult to get Low Doc loans with credit defaults. We have seen the mortgage insurers refuse to insure low doc loans with any sort of default. These low doc loans are commonly called credit impaired  low doc loans. One of the main criteria looked at with these credit impaired low doc loans, is the size of the default and whether or not it has been paid, and when it was paid. Minor telco defaults, and defaults $1000 or under, for low doc loans may be looked at differently to larger unpaid defaults.

For low doc loans with larger defaults they are still available. As a guide these low doc loans, may be done for residential properties in major metropolitan areas and up to 80% of the value or purchase price.

For credit impaired low doc loans without BAS the following will also be required:-

The last 4 months bank statements for your business account, transaction account, and last personal bank account statement.

With credit impaired low doc loans each one is assessed on its merits.

Please call us on 1300 LOW DOC and we will let you know what pricing we can do for you.

Variable interest rates rising

With the large four banks increasing variable rates, Low Doc Loans are set to get more expensive. We are now also starting to see the emergence of two types of low doc loans. Low Doc loans with BAS statements and Low Doc Loans without BAS statements. Don’t be surprised if there is another rate increase for low doc loans before the end of the year.

We are also starting to see some lenders add a margin for the perceived increased risk of low doc loans.

What is the future for Low Doc Home Loans?

Low Doc Loans have been around for many years. Previously low doc loans were done through solicitors funds at around 66%.

Over time, the banks then started to slowly start to enter this space. In 2005, the RBA commented about Low Doc Loans.

For the full article.

With the beginning of the credit crisis in 2008, there was a general tightening of lending across the board. Much of this was to do with bad credit. There has been confusion between bad credit and Low Doc Loans. In Australia they are different. Most Low Doc loans in Australia are for self employed with minimal paperwork and are normally clean credit.

Standard & Poor’s in October 2009, has indicated Low Doc Loans in Australia are not a problem.

Standard & Poor’s has backed the government’s decision to direct the Australia Office of Financial Management to invest in residential mortgage backed securities with a higher proportion of small business loans when it invests the additional $8 billion the government has allocated to support new RMBS issues.

For the full article.

Low Doc Loans are still being written, but they change as the credit markets change. With the norm for the banks now being 60%, Low Doc Loans have effectively gone full circle. Low Doc Loans without BAS at 80% are still possible, however they will be priced according to risk.

With this in mind, even though lending for Low Doc Loans has tightened, with the credit markets starting to free up again, over time, Low Doc lending will also start to free up again as well.

If you want to know the future for Low Doc Loans, one guide is to look at the general credit markets. When things are perceived as bad, low doc lending will be tight. When things are perceived as optimistic, low doc lending will be more liberal.

Since writing this post in late 2009, in March 2010 Macquarie has already returned to the low doc market. This is an indication of where we are heading and it has happened quite quickly.

Macquarie Low Doc Loans

Given the current credit climate it may also be timely to remind customers of the risks associated with Low Doc Loans. The following from ASIC may help.

The above is information only and not advice.