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.

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 please call us.

These low doc loans will require three 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 we asking for bank trading statements?

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.

This new measure has been designed by government to make home loans more competitive..

“Part 7-2A ‘Prohibited credit fees and charges’ of the National Consumer Credit
Protection Amendment Regulations 2011 (No. 2) prohibits charging customers
termination fees if a credit contract is entered into on or after 1 July 2011.

Some non banks were charging very high loan exit fees, such as 1 or 2% of the original loan amount. They were so high they wiped out any savings consumers might get from switching to a cheaper home loan with a new lender.

Of course new loans, including low doc loans will not have loan exit fees, however there are a lot of low doc loans out there with deferred establishment fees already in place.

This increased competition will make it easier to switch to a better home loan deal if you become unhappy with your current home loan.

It means more financial choices and if lending institutions introduce unfair fees they can be fined.

For more information see the government home page of Banking Reforms.

Would you like a property market update?

Please note this report is free and very detailed. It contains a lot of information.

If you would like a free property market update, then please visit the Investment Property website, fill out the form and you will be emailed a free property market report.

The report contains a snapshot of what is happening in the major cities, house and unit prices, changes in dwelling values, and capital cities capital growth and sales volume.

The report is over 20 pages in length. For full details of what is contained within the report see Investorpac.

To qualify for low doc car loans you must have an ABN for at least 24 months, and have clean credit. The vehicle must be purchased from a licensed dealer.

For full details and rate see Low Doc car loans

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

Low Doc Loans are not dead! Low doc loans are still available, however, they now require more verification.

With the banks adopting more cautious lending policies  it would appear the self employed, as the largest group of low doc loans borrowers, have been the hardest hit by both the GFC and NCCP.  As with anything new it will take time to adjust, however, eventually small business owners will adapt to the new credit environment we are in.

So in conclusion, the lending criteria for major banks is now changing rapidly, and BAS is now part of the landscape.

There has been a real tightening of credit policy by the banks. The days of the low doc declaration only have disappeared. Banks are now starting to take a “limited income evidence” approach. CBA have just changed their low doc loans policy to require BAS statements on all low doc loans.

Further, we have just seen RAMS Home Loans founder John Kinghorn warn that home loans to self employed may dry up.

What does this mean for those looking for low doc loans?

Lenders are looking for further verification as to the income declared. This can take the form of bank trading statements, BAS statements or an accountants letter.

Currently the more difficult low doc loans are 80% low doc refinances and construction.

For development finance, we now have access to a funding line coming from offshore. This Project finance is for sound developments between $10m to $100m. As local Australian banks have tightened their development lending, offshore funding has now stepped in to fill this gap.

If you require development finance, please call us on 1300 LOW DOC

• NO LMI applicable between 60% & 70%
• Max loan amount $1.5m on single security and $2m for multiple securities
• Available for purchases and refinance (no cash out or consolidation of unsecured debt)
• Refinance business debt up to 20% of loan amount
• Company and trust borrowers acceptable
• Construction available
• Bridging Finance
• 100% Offset
• Lo Doc to full doc conversions available anytime
• BAS and Bank Statements
• Lo Doc declaration & Accountant verification

Applicants, which can also include companies, must have clean credit and current loan must have been paid on time. This is to be shown through six months loans statements. Specialised securities are not acceptable at 75%. Can be for both owner occupiers and investors. Must have 2 years ABN.

Max interest only period is three years, however maximum loan term can be 25 years.

True term loan.

Interest rates for Low Doc Commercial

Some Low Doc Loans that were written a year ago, or even six months ago are just not able to be written today.

As well as tightening of credit policy, mortgage insurers such as GE and QBE have also tightened and to top it off some of the major banks are now credit scoring.

So what is the answer? The general rule is your first shot is your best shot. Make sure you are aware of what most lenders are requiring.  As a guide, minimum two years ABN, registered for gst, clean credit, purpose of the extra funds outlined, and good repayment history. Be aware also, that once a loan has been to a lender and it has been knocked back, it may be harder to get it approved the second time around with a different lender due to credit scoring.

In summary, even though credit for low doc loans is more difficult,  low doc loans that satisfy the above criteria do have more chance of being approved. Now, more than ever, it pays to get it right the first time.

As a guide the loan being refinanced should be a full document loan and if there are any extra funds being requested then the purpose of these extra funds must be clearly stated.

Full Doc Loan to Low Doc Loan at 80%

For 80% refinance low doc loans

Require:-

1. Income Declaration Form
2. BAS
3. No business trading statements
4. Six months current loan statements (including credit card statements) showing excellent repayment history (absolutely no over limit or missed payments)
5. Clean credit
6. Two years ABN
7. Registered for GST
8. The applicant must be clearly able to demonstrate capacity to repay the loan.

Low Doc Loan to Low Doc Loan at 80%

If the loan being refinanced is a low doc loan and you want to refinance to 80%, the purpose of the extra funds must be clearly explained. The applicant must be clearly able to demonstrate capacity to repay the loan.

Require

1. Income Declaration Form
2. BAS
3. Three months business trading statements
4. One months personal statements
5. Six months current home loan statements showing excellent repayment history (absolutely no over limit or missed payments)
6. Clean credit
7. Two years ABN
8. Registered for GST
9. 60 to 70% NO LMI charged to customer

What does this mean?

Refinances will no longer be available, using a Bankwest Low Doc Loan.

For purchases there will be the re launch of the Easy Doc Product. This means there will only be one rate irrespective of the LVR. The Easy Doc Home Loan will automatically roll to the Lite Home Loan after the 3rd year anniversary date

60% LVR

Generally low doc loans 60% or less do not require mortgage insurance.  For this reason they are easier to qualify for. However, they do require 40% equity.

Up to 80%

These low doc loans are normally mortgage insured, however, it is possible to get 80% low doc loans without BAS, without mortgage insurance. For the mortgage insurance low doc loans, one of the first things looked at is the postcode. In many cases, the postcode of the security property will determine what level the mortgage insurer will go to. To search these mortgage insurance postcodes, click on this location wizard, and enter your postcode.

The figure under LMI Self Certified is the maximum loan size the mortgage insurer will consider in that postcode.

If your postcode returns “On Application”, then this generally indicates that in the eyes of the mortgage insurer the security area may not be as strong.

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.

St George Low Doc Loans and Westpac Low Doc Loans have held off moving more than the RBA rate increase as well.

Both the CBA and ANZ will also increase their deposit rates by 0.25% as well

Are rates heading back to normal?

What’s normal home loan rates?

As a footnote to the above, ANZ Low Doc Loans are no longer being done at 80%. CBA and many of the major banks are now requiring BAS statements with their 80% low doc loans. Given this need 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.

85% LVR Low Doc Loan for clean credit still achievable in major metropolitan areas.

Also Low Doc Loans for vacant land are still attainable as long as land has an investment purpose. A low doc loan for vacant land is similar to a Serviced Apartment Low Doc Loan and is considered on a case by case basis.

Looking for a low doc loan for your motorcycle purchase, or a marine low doc loan? then call us 1300 LOW DOC

Rates are different dependent on upon whether it is a refinance of an existing low doc loan, or a purchase. Rates as per the home page.

If you are in Sydney, the rate may be cheaper for the LOW DOC 80 with NO BAS NO ABN refinances.

Low Doc Construction 80% LVR with No BAS returns also considered in major metropolitan areas. Tender must be from a major licensed builder.

The security property for the low doc business loan must be in a major metropolitan area.

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.

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.

Up to 10 per cent of loans funded under the next planned round of $8 billion in investment may be low doc, though still secured over the borrower’s home….

Full article from The Sheet

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 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%

The current RBA cash rate target is 4.25%

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

Responsible lending under the proposed National Consumer Credit Protection Bill 2009 (NCCP) is designed to ensure that consumers are not provided or suggested unsuitable credit for their circumstances.

In early October, Senator Joe Ludwig, Special Minister of State, announced proposed reforms to the Privacy Act and Regulations. An exposure draft of the legislation will not be available until early 2010

The proposed reforms introduce “positive” credit reporting.

Introduction of five “positive” datasets in an individual’s credit report file would enable a more comprehensive assessment of a person’s credit risk. The “positive” datasets are:

1/ type of each credit account opened (e.g. mortgage, credit card, personal loan);

2/ date on which each credit account was opened;

3/ current limit of each open credit account;

4/ date on which each credit account was closed;

5/ credit repayment history, which will include whether in the past two years the individual has met repayment obligations.

Until responsible lending obligations under the NCCP Bill begin in January, 2011, credit repayment history data won’t be available.

However, repayment history may be reported from April 2010.

At the moment credit reporting is “negative”, therefore more limited, eg, it only includes information about any applications for credit and overdue accounts (defaults) etc.

For credit providers, the changes should mean there is more information available for the assessment of a consumer’s financial situation and thus meet responsible lending obligations. However, it may also mean some consumers are refused credit or are offered less.

The above is information only, which is based on a draft of the legislation. It is for general information only and should not be relied on as specific advice for your particular circumstances or as a substitute for professional advice.

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.

However, Low Doc loans without BAS are still available at or near home loan rates. If you are being quoted an investment interest rate that doesn’t begin with 5. something percent you may be paying too much. Generally, to purchase at the 80% mark, you will need clean credit, be registered for GST, it is preferable to have an ABN that has been registered for at least 2 years, and the residential property should be in a major area.

Of course all of the low doc loans applications are subject to a particular lender’s credit criteria.

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

As a footnote to the above, CBA are now requiring BAS statements with their 80% low doc loans. There is still alternative low doc finance out there at 80% for both purchases and refinances that do not need BAS.

Further effective 24 September 2009

All RAMS Low Doc loans applications are to be supported by the following:-

1. Business Activity Statements (BAS) for the past 12 months and ATO Lodgement Reference Number AND
2. The last 3 months account statements evidencing payment of tax as advised on the BAS.

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

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.