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3 Year Fixed Rate

May 5th, 2011 No Comments
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Almost everyone will need to take out a loan at some point in his or her life. Whether it be in the form of a home loan, to start a business, or to purchase a vehicle, loans are necessary for many of the major transactions we enter into. Choosing the best loan, however, can be a very tricky process at times. With all of the different terminology involved, the lending process is confusing for a lot of people. However, if you make an effort to understand the various options available, you can save yourself a lot of trouble later on. This article will discuss one of the most popular loan options- the 3 year fixed rate loan.

When looking for a loan, there are several different types you can consider. Some loans are variable rate loans, which means that the interest rate is subject to change over time, while other loans are fixed rate loans. A fixed rate loan is a type of loan in which the interest rate will remain the same for a predetermined period of time. One of the most common fixed rate loans is the 3 year fixed rate loan, though other lengths are also available such a 5 year or 10 year fixed rates.

If you decide to obtain a fixed rate loan, you will probably want to find the lowest rate possible. Since the fixed rates available are constantly changing, the lender that has the cheapest rate today may not be the same one whose rate is cheapest tomorrow. The best plan of action when applying for a 3 year fixed rate loan is to wait until you are ready to go through with the transaction and compare the rates available at that time.

Though the rate percentage is extremely important, there are several other aspects of the loan other than the rate percentage that should be taken into consideration. First of all, one needs to consider the rate lock fee. These fees can be considerably different depending on the lender. Some lending institutions charge on flat fee for the rate lock, while others may charge a given percentage of the loan amount. If your loan will be relatively small, it will probably be in your best interest to find a lender that charges based on percentages. However, borrowers of large loans will benefit more from a flat fee. Finally, there are some lenders that may not charge any rate lock fees, so it is important to compare all of your options before you make a final decision.

Another aspect that needs to be taken into consideration when choosing a bank is the revert rate. Some fixed rate loans revert to the variable rate at the completion of the fixed rate period with no discount whatsoever. However, it is possible to find fixed rate loans that revert to a rate that will likely be lower than the standard variable rate.

Finally, when you are considering different lenders, you need to pay attention to the flexibility allowed. A lot of fixed rate loans will not allow you to make any extra repayments for the duration of the fixed rate period. However, some lenders will allow the borrower to make repayments during this time. This extra flexibility can be very beneficial should you feel the need to pay the loan off early. Believe it or not, some lenders allow you to make extra repayments on a fixed rate loan.

The 3 year fixed rate loan is the most popular among fixed rate loans because many of these types of agreements will penalize the borrower should he or she decide to make extra repayments or exit the loan early. In fact, many fixed rate loans require the borrower to pay something called a “break cost” if they end the loan early. A break cost can be very expensive. For this reason, 3 year loans are often preferred because the time is long enough to make the fixed rate worthwhile, but not so long that the borrower would feel the need to exit early. That being said, it is very important to understand the break costs you will incur should you choose to exit the fixed rate loan before its predetermined end date, so be sure to factor these costs into your comparison as well.

In order to get the best of both worlds, many clients choose to take out a split loans or mortgages in which part of the loan is a fixed rate and the other portion is a variable rate. This option allows the client the security of a fixed rate on one portion of the loan while allowing him or her to make extra repayments on the variable rate portion if he or she so desires.

It should be noted that taking out a 3 year fixed rate loan in the last 20 years has actually been more expensive than a standard variable rate loan in the end due to the trends of the variable rate. For this reason, it is very important to compare your options carefully before signing any type of loan agreement so you don’t lose in the long run.

Home Loan Types

May 3rd, 2011 No Comments
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A loan is a form of debt incurred when someone, called a lender, lends an amount of money, called the principal, to another person, called the borrower. The borrower is then expected to repay an equal or greater amount of money at a later date. The money is usually expected to be repayed in regular payments of the same amount. 

In the majority of cases, the lender provides the loan at an additional cost, called interest. Without interest, there would be no financial incentive for the lender to provide the loan. In legal loans, all of these obligations are regulated by a contract. Most legal loans, such as mortgages, are obtained from financial institutions such as a bank. 

Loans are often used in major transactions such as home purchases and vehicle purchases since most buyers cannot afford to pay large amounts of money out of pocket. Often, the borrower will be required to put down a deposit on the loan in order to secure it. In cases where the loan to value ratio is high, the lender may also ask that the borrower pay mortgage insurance on the loan. 

There are several different types of loans available including standard variable loans, basic variable loans, fixed rate loans, line of credit loans, combination loans, discount variable loans, lo doc loans, and non-conforming loans. These different types of loans are detailed below. 

Standard variable loan

A standard variable home loan is a loan in which the interest rate changes throughout the duration of the loan. These types of loans may be combined with a package that allows them to eligible for a lower rate. A standard variable loan will also include a mortgage offset account. 

Basic variable loan

A basic variable loan is also a loan in which the interest rate can change throughout the duration of the loan. The interest rate for this type of loan will be similar to that of a standard variable loan, but will usually have a packaged loan discount. Basic variable loans typically have less features than the standard variable loan. 

Fixed rate loan

A fixed rate loan is a loan in which the interest rate is fixed over a set period of time. These loans usually penalize the borrower should they choose to exit the loan before it is set to end. The borrower will have to pay a “break cost,” which can be very expensive. If there is any chance that the borrower will repay the loan early, he or she should not take a fixed rate loan. 

Line of credit loan

A line of credit loan is a loan without a set amount. Instead, the borrower can draw any amount up to the credit limit at any time. There are no set repayments, and the loan will have a variable rate. Payments can be made toward the balance at any time. Some lenders ask that the borrower make at least one repayment each month, while others don’t ask for any payments until the credit limit has been reached. The required payment in the first case must usually at least equal the interest accrued in the previous month. 

Combination loan

A combination loan is an option offered by many lenders in which the borrower receives a professional package. The package includes multiple fixed rate loans, variable rate loans, and line of credit loans. The borrower will then be asked to pay an annual fee for the package. A common type of combination loan involves the borrower receiving a portion of a loan as a variable rate and the remainder as a fixed rate. This offers the borrower the benefit of not having to worry about rate increases on the fixed rate portion while still being able to make extra repayments on the variable rate loan without penalty. 

Discount variable loan

A discount variable loan is a variable rate loan that includes a lower interest rate. This discount will typically be more than the discount received with a packaged loan. The discount is typically valid for one year, so it is possible that this type of loan will work out to be more expensive in most cases. 

Lo Doc loan

A lo doc loan, or low documentation loan, is a loan in which the borrower is not required to provide tax returns or financial reports. This type of loan is most often used by borrowers that are self-employed and don’t have access to such paperwork. Most lenders do require some proof of income, however, which can be in the form of bank statements. 

Non-conforming loan

A non-conforming loan is a loan that does not require the borrower to meet the standard lending criteria. This type of loan is not usually available from mainstream lending institutions. A non-conforming loan is typically given to borrowers with credit problems or a history of late or missed repayments.

 Get more information about home loan types.

Understanding Non Bank Lenders

May 3rd, 2011 No Comments
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Most people think of banks when buying a home, but banks are not the only ones writing mortgages. An Australian banking license is not required for issuing a mortgage, and sometime non bank lenders can provide you with more competitive terms and better rates. Before making a decision on financing, you should understand some basic information about mortgages. 

Understand the Terms

All lenders use the same terms. Here’s a quick review of what you must know when seeking a home loan, regardless of what type of lender you choose. 

Loan to Value Ratio (LVR) – The bank will not loan you more money than the house is worth, and they like to loan you a little less. LVR is determined by dividing the amount of the mortgage by the value of the home. If your house is worth $100,000 and you borrow $80,000 towards it, then your LVR is 80%. 

Assets – Any property you own is an asset. Your home will be the largest asset you own. 

Equity – The home’s value above and beyond what is owed on a mortgage is the equity. A home that is worth $200,000 with only $75,000 owed on it has $125,000 in equity. 

Liabilities – Any other debt you have is a liability. This includes loans for University, credit cards, and autos. 

Loan Maintenance Fee – This is a fee levied by lenders over the term of the loan. 

Principal – This is the amount of money that is currently owed and that interest will be paid on. 

Types of Mortgages

Basic Variable 
This mortgage is very basic. The interest rate is set according to the Reserve Bank and will go up or down along with it. Extra payments are typically allowed, and terms are usually 25 or 30 years. 

Standard Variable 
This is the most popular mortgage type. The interest rate will be slightly higher than a basic variable loan, but there is more flexibility. Extra payments can be made and there are other attractive features. Terms are typically 25 or 30 years. 

The Honeymoon Rate 
Also known as an introductory rate, these loans feature a low fixed interest for the first year. After that, it reverts to a variable rate. It’s a good idea when interest rates are rising fast, but can work against you if the interest rates fall during that first year. Most banks expect that you will keep these mortgages for 3 to 4 years and will charge penalties for not doing so. 

Fixed Rate 
The interest rate, and the payments, can be locked in for a period of 10 years or less. Once that time is done, it will revert to a variable rate. This is another good option in times of rising interest rates, but can work against you should the rates begin to fall. 

100% Offset Accounts 

These are essentially savings accounts that can be attached to your variable or introductory rate mortgages. This account works to help you reduce the amount of interest you pay every month. 

All in One Loans 
Your home loan and transaction account are combined. Payments are made directly from the account, allowing you to keep the funds available to you for as long as possible. Interest rates may be higher, or you may have to pay a monthly fee for these loans. 

Line of Credit 
You can take a line of credit against the equity you have built up in your home. There is no set term, and it’s good to have the money available in case you need to make repairs. However, it is easy to spend that equity and these loans should only be used with great care. 

Know the Types of Titles

Torrens Title 
Traditional single family homes typically have a Torrens title clearly naming who the owner of the property is. 

Strata Title 
Townhomes and condos are popular because owners do not have to do as much maintenance. Strata titles define the individual unit by the airspace it occupies, and a strata corporation is named to handle the common areas shared with your neighbours. 

Community Title 
Buying in a community with its’ own pools, parks and playgrounds provides you with plenty of entertainment for the kids. It also means that you might have a community title. Your home will be owned by you, but the community title is necessary to cover those shared areas. 

Company Title 
When buying a condo, townhome, or apartment you should check to see if a Company title is in place. Rather than an individual owning any one unit, all units are owned by the company and buyers purchase shares in the company. Company titles are set up so that all owners in the company can have some impact on any potential sales of other units. This means that the neighbours could prevent you from buying the apartment, or selling it later. Most lenders are leery of these properties, and might require a larger down payment from you. 

Advantages of a Non Bank Lender

  • Oftentimes, you can get a lower interest rate by going through a non traditional lender 
  • They may provide you with better customer service, including faster application times. 
  • People with credit problems, unusual properties, or specialized loans are more likely to be approved with these lenders. 
  • They will make loans with higher LVR’s, allowing you to put less money down. 
  • Self-employed people do not have to produce as much paperwork. 

Disadvantages of a Non Bank Lender

  • Upfront fees and loan maintenance fees might be higher, offsetting savings from lower interest rates. 
  • The chances of your loan being sold are higher with non bank lenders. 
  • There is a higher risk of the institution going out of business, wiping out any benefit from superior customer service. 
  • They might be slow to pass on dropping interest rates to their customers, in some cases the decreases won’t be passed on at all. Increases to the interest rate, however, are passed on as soon as they occur. 
  • They are quicker to repossess if you fall behind. 

Competition is always a good thing. Lower rates and better terms result when banks and non bank lenders are competing for your business. Before signing any mortgage, however, you should understand how the process works, know the terms, and know exactly what to expect out of your new mortgage.

Home Loans With A 457 Visa

April 27th, 2011 1 Comment
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If you are classified as a temporary resident of Australia with a 457 visa, there are certain obstacles that you may face which can make applying for a mortgage more difficult. Buying a home is never a simple process, and it certainly doesn’t get any easier if you are considered a foreign citizen. That said, a more complicated application process shouldn’t be enough to discourage anybody from buying a home, which is one of the most rewarding financial decisions that you will make in a lifetime.

Deposit

The first obstacle that you are likely to face is the deposit. Many Australian citizens can apply for a loan with a small deposit, or no deposit to speak of. If you are staying in the country on a skilled workers visa, this typically is not an option, In most cases, you will be required to make a deposit worth 20% of the value of the home. For a $200,000 home, this would be $40,000.

The expenses associated with buying a new home amount to about 5%, so it is generally a good idea to save up about 25%. In the example above, the extra 5% would be $10,000, bringing the total that you should save up to $50,000.

While this obstacle may be frustrating, it may actually be for the best in the long run. Those who have the opportunity to apply for a mortgage with a smaller or nonexistent deposit will also pay a higher interest rate, and be required to pay for the lender’s insurance that the bank needs to protect itself against the threat of foreclosure.

If you have been working at your current job for more than a year, it may be possible in some circumstances for you to apply for a mortgage with only a 10% deposit. You will typically need to work with a mortgage broker who offers this type of deal in order to qualify.

Options

Not all lenders will be willing to work with somebody who is in the country on a 457 mortgage. Many banks consider you to be too high a risk. Fortunately, the banks that are willing to work with you will tend to treat you the same way that they would treat a citizen. As mentioned above, their will often be limitations on the size of your deposit, but beyond that the interest rates and terms of the home loan should be essentially the same.

Since it can be somewhat difficult to find these lenders, it is a good idea to get in touch with a mortgage broker. Brokers have contacts in the lending industry, and know exactly which banks are willing to work with you and your situation. This saves you the time that it would take to shop around and find a lender that is willing to work with you. Brokers also know which lenders offer the best interest rates. There are even some brokers available who specialize in working with immigrants and temporary residents, which helps the process run even more smoothly.

Government Involvement

Another thing to be aware of is the Foreign Investment Review Board, known as FIRB. Since you are not a resident of Australia, you need to apply for approval from FIRB. This may sound somewhat concerning, but rest assured that nearly all applications are approved. Still, it is worth understanding the involvement of this government organization.

To begin, you are not prohibited from purchasing either old or new property, as long as you plan to live in the property yourself. If you leave the country, you will be required to sell the home. If the property is old, you can’t buy it unless you are going to live in it.

Another thing to keep in mind is that your own personal financial situation has no bearing on FIRB approval. The board only considers your residency status and the type of property you are considering buying.

The process of applying for approval from the board is relatively simple. The form is only about three pages in length. As long as you are buying the home for your own personal use, and not as an investment, you shouldn’t have any problems. If you are buying the property for investment, you still won’t tend to have problems as long as the property is new.

Can You Receive a Grant?

In most cases, you will not be eligible to apply for the First Home Owner’s Grant (FHOG) unless you are an Australian citizen or permanent resident. There may be an exception if you are buying a home with somebody who is a resident or citizen.

Learn more about 457 visas.

Financial Management In Australia

April 23rd, 2011 No Comments
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The Australian banking system works in much the same way as the banking system in other industrialized nations throughout the world. It is easy to get in touch with representatives of the bank, and in most cases the banks are used to working with immigrants who do not speak English.

Concerns You May Be Facing

If you are the type of person who spends a great deal of their time moving from one location to another across the globe, or if you are moving to the country, you have many different things that you need to keep track of. Not only do you need to physically relocate your possessions and find a place to live, you also need to deal with bureaucratic issues such as making sure that your visa is in working order.

In addition to all of these concerns, it is also important to make sure that your financial situation is properly taken care of. This covers everything from opening an Australian bank account to ensuring that all of your payments are made on time. Thankfully, the Australian banking industry can help simplify this process and alleviate some of the stress that you might be going through.

The Australian Banking Industry

The banking industry in Australia is one of the most reliable in the world. In fact, the World Economic Forum has rated the Australian banking system second place compared to any other banking system in the world. In addition to bank accounts, banks in Australia offer a wide range of wealth management services. Products that they offer include loans for personal, business, and mortgage purposes. Insurance, investments, credit cards, and financial planning services are also available.

Many of the banks in the country can help you set up your accounts, credit cards, and other financial products even before you move into the country, which makes the process a great deal simpler.

In addition to this, there are international banking teams that you can take advantage of, providing you with access to a staff that can speak a wide variety of languages.

Checking Account

The first place that you will want to start when you move to the country is a simple everyday checking account that you can use for day-to-day transactions like paychecks and grocery shopping. There are several things that you will need to think about before you choose to set up an account.

The first thing that you should look for is a bank that is part of a strong network. The availability of the bank should be widespread so that you will be able to access your account no matter where in Australia you are located. At the very least, you will want access to ATMs that will give you access to your account without needing to pay a fee. Australia is not a small country, so the importance of a national chain should not be understated.

It is also a good idea to deal with a bank that you have access to twenty four hours a day, at least online. Do your research and find out if their telephone and website systems are convenient, easy to use, and offer a wide variety of services. The more you can do with an online system, the more time you can save. This advantage is twofold, because a bank with good automated systems also has more time available for its customers who need to speak with a human being.

Never sign up for a bank account without understanding its fee structure. You might be charged for certain types of transactions, for not having enough money in the account, for over-drafting, or even simply for having an account with the bank. Take a close look at the way you use your bank account before you agree to any fee structure.

Savings Accounts

If you have additional funds that you want to protect from the effects of inflation, it is also a good idea to sign up for a savings account, a certificate of deposit, or a similar financial package. Banks earn money by lending out their customer’s funds in exchange for earned interest. If you open up a savings account, you can earn some of this interest yourself. Be sure to find out what the withdrawal limits and fees are before signing up.

Credit Cards

It is a good idea to have a credit card on hand in order to make emergency payments that you can’t otherwise afford, or to build up your credit rating. Banks in Australia offer the same major credit cards that are available in most countries throughout the world, including MasterCard, Visa, and American Express. They also provide new “contactless” cards, which make it possible for you to buy inexpensive items without needing to enter a PIN number or leave a signature.

Of course, if you are planning to make a larger purchase, it is usually a better idea to take out a loan instead. The interest rates are lower, meaning that the costs are also lower in the long run. If you have enough evidence that you will be able to pay off your loan, there are some banks that will approve you on the same day that you apply.

If you are a new migrant to Australia then you should seek the help of a professional mortgage broker before you take on the commitment of a loan. Borrowing money in a new country is an entirely new ball game, so you need to get advice to avoid making any mistakes.

Family Pledge Mortgages

April 22nd, 2011 2 Comments
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If your financial history does not allow you to receive approval for a home loan on your own, you might have more luck if you take advantage of the power of family pledge mortgages. This is when a family member agrees to offer support for your loan by putting up equity in their own property or providing income assistance. This can also be beneficial for people who want to apply for a loan on a home that is too expensive for them to apply for under normal circumstances.

Reasons Why You Might Want to Apply

  • If you have children who are buying a home, they may be limited in the size of a loan that they can apply for. This could be because of their income, or it might be because of the size of their deposit. Relatively small deposits also mean higher interest rates and lender’s insurance.
  • You may want to help your children buy a property now, rather than forcing them to wait until they can save up a large enough deposit.
  • You may have children who don’t have enough money to buy an expensive home now, but they are in a field where it makes sense to think that their income will continue to grow.

Equity Support

Equity support is the most popular form of family pledge mortgage. Under this model, you take advantage of the equity that you have placed into your own home as a form of security. This makes it possible for the family member to buy property of their own.

When somebody takes out a loan with a deposit smaller than 20% of the value of the home, the borrower is usually required to pay for lender’s insurance. The cost of lender’s insurance can be very high, and dramatically reduces the amount of funds available each month for other purposes.

If a borrower has a small deposit, or no deposit at all, a family member can dramatically improve the situation by making a family pledge. In this case, the borrower only applies for an 80% mortgage for the new home. The family member then secures the rest of the value of the home using the equity in their own property.

This process has several benefits. First of all, it is much simpler for the bank to approve the application. This is because the bank only needs to approve the loan internally. It does not need to contact their lender insurer to see if they also approve the loan. The monthly costs are also much lower, since the borrower is not required to pay for this insurance.

In most cases, the person making the pledge will only be responsible for the 20%. They typically are not held liable for the rest of the loan, so the risks are relatively low for them.

It is also worth pointing out that there is no reason that the equity has to come from a family home, although this is the most common type of pledge. It could also be an investment property. All that matters is that the property is owned by the person making the pledge.

A family pledge can be removed when the remaining principle of the loan is less than 80%. This can be because the value of the property increased, because this part of the balance was paid off, or both.

Income Support

This type of pledge is less common because it requires the person who is making the pledge to make themselves liable for the entire amount of the loan. If the borrower’s income is not high enough for the lender to offer them a loan, you can pledge that you will provide your own income to help pay for the loan if necessary. The downside of this is that if they fail to make payments on the loan, you are held 100% liable to make the payments.

While this is significantly different from equity support, both types of pledge can be made at the same time. Equity support can be used to cover the deposit, while income support can be used to increase the overall size of the loan.

An income support pledge can be removed once the other borrower can demonstrate that they are earning enough income to pay for the loan on their own.

Learn more about family pledge mortgages.

10 Top Tips for Migrants Purchasing a Home in Australia

April 21st, 2011 No Comments
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Buying a home is never easy, and it gets harder when you are not a citizen. If you’re moving to Australia you might need some advise about the best way to move forward. Here are ten things to keep in mind.

1. Save as much money as you can. You will need to make a deposit in order to purchase a home. In most cases, your deposit will be between 10% and 20% of the value of the home (or more if you like). Lenders are much happier to work with borrowers who can save up a deposit. If you plan to buy property from Australia, you should start transferring funds into an Australian bank account, even if you don’t already live in Australia. Australian banks will see you as a lower risk when they see that you have been saving money for a period of three months or longer.

2. What will you be able to borrow? Obviously, this will depend on your financial situation and your income. That said, your residency status can also have an effect on the type of loan that you can apply for. If you are a foreign citizen or temporary resident, you will usually need to make a deposit of 20% of the value of the home. In some cases, a lender might be willing to accept a 10% deposit if you have been working in Australia for over a year. As a permanent resident, or somebody who is married to or in a relationship with a permanent resident or citizen, you will usually be eligible for a 95% mortgage.

3. Save up for expenses. No matter what size deposit you are required to make, there are other expenses that such as taxes and fees that are not included in the purchase price of the home. These amount to about 5% of the value of the home. You should expect to need to pay these costs in addition to the deposit.

4. Government approval. Since you are not a citizen or permanent resident of Australia, real estate purchases are policed by the Foreign Investment Review Board. This is not as frightening as it might sound. FIRB exists to ensure that foreign investors don’t take part in frivolous speculation that does nothing to help the Australian economy. If you are buying a home for your own personal use, you have nothing to worry about. Even so, you will need to apply for FIRB approval before buying a home. If you are an investor, you are limited to buying new property.

5. First Home Owners Grant (FHOG). Only permanent residents and citizens are eligible to receive this grant, so you should either wait until you become one or do without one.

6. Talk to a mortgage broker. Generally speaking, brokers are free in Australia. They receive commission from the lender, although they work independently of them. A broker can help you find the lender that best fits your situation. Not all banks are willing to lend to foreigners and temporary residents. They also know which lenders charge reasonable rates. In many cases, brokers have exclusive deals with lenders that are not otherwise available. A broker also eliminates the need to shop around for the right lender, and you will only need to provide your financial information once.

7. Get pre-approved. It is a bad idea to offer to buy a property without approval from the bank. If you agree to buy a home, and the bank doesn’t approve you for a loan, you can lose your deposit, and might even be sued by the vendor. Pre-approval also reduces the wait time necessary before buying a home. The right home for the right price doesn’t stay on the market for very long. If you aren’t pre-approved, it might take longer than the vendor is willing to wait for you to receive the loan.

8. Income isn’t the only consideration. Lenders will also need to collect information about your expenses. This might include the costs of marital or child support, the costs of insurance membership, memberships with other groups, cable subscriptions, private school costs, and anything else that you are required to pay for each month. If you are having trouble getting a loan for the type of home you are interested in, you might be able to help your situation by reducing some of these expenses, if possible.

9. Find a conveyancer or a solicitor. They handle the legal documents in order to make sure that there is no potential for legal problems, and to assure that the contract between you and the vendor is fair.

10. Do not apply for a large number of mortgages, loans, or credit cards in a short period of time. This can hurt your credit rating, and make it difficult to get approval.

Learn more about buying a home in Australia.

Low Doc Loans: 80% LVR

April 20th, 2011 1 Comment
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When you decide to purchase a piece of property, either as a residence or for financial investment purposes, you will most likely need to apply for a loan. Before you will be granted a loan, the bank will want to be certain that you have the ability to make the repayments. This typically requires you to produce tax documents and check stubs, but not everyone can do this.

Applying for mortgages can be an intimidating process, especially if you don’t have the documentation usually required by lenders. There are a lot of different types of loans available, but many of them aren’t accessible to individuals with little or no proof of income, such as those that are self-employed or work as independent contractors. However, there is an option available: the low doc home loan.

A low doc loan, also referred to as a low documentation loan, is a home loan in which the paperwork used in standard loans is not required. This type of loan is perfect for self-employed borrowers that don’t have the proof of income papers typically used in applications for standard loans. Generally, lenders of low doc loans will ask the applicant to provide some proof of income, such as recent bank statements. In addition, low doc home loans are only available for loan to ratio values up to 80%.

Lenders offering 80% low doc home loans may have varying requirements, however most lenders ask that the borrower meet the following basic criteria:

1. You have been self-employed for at least one year in the country of Australia.
2. You have had an ABN number for at least one year.

The idea behind these criteria is to make sure that the borrower has a steady source of income and can afford to make the repayments. Other requirements may also apply depending on the lender. However, understanding these other requirements can be tricky. The requirements for low doc loans with high loan to value ratios, usually between 60% and 80%, are fairly confusing. Below, you will find the details of some typical low doc loan situations.

Issue A:
Refinancing a loan without sufficient business activity statements, or BAS statements.

One option for solving this problem is to acquire a loan with a loan to value ratio between 60% and 70%. Loans for a loan to value ratio of up to 70% can be acquired from one of the major providers without trading statements or BAS statements. Instead, the applicant needs only provide a letter from an accountant confirming that the loan is affordable. In addition, there is no mortgage insurance is required. Some other providers may also provide low doc loans up to 70% loan to value ratio, but the qualifications are stricter.

Another option would be to acquire a loan for a loan to value ratio between 70% and 75%. This type of loan can be obtained through a regional bank with certain requirements. The applicant must have been GST registered for more than 2 years for a loan to value ratio of 75%, but only for one year if the loan to value ratio is 70% or less. This loan is only available if you will remain under $1,500,000 in total loans, including those you may have from other lenders. Not available to developers, primary producers, or builders.

The third solution is to look for a loan with a loan to value ratio between 75% and 80%. Though it is possible to find a loan of this type from providers who won’t ask for BAS statements, the rates and fees will likely be higher than for other loans. In addition, it is not easy to find lenders that will consider cash out loans.

Issue B:
Purchasing a home at 80% loan to value ratio without BAS statements.

In this case, you can get a loan from a non-bank lender, a second tier bank, regional bank, or even a major bank. You will need GST registration and ABN for one year or more. Fees and rate will be comparable among lending institutions.

Issue C:
Obtaining a loan when your exposure is too high with your current lender.

To solve this problem, you will need to engage in debt consolidation and then spread your loans out over several lending institutions so that you meet all of the requirements of each institution. In doing this, it will give you the ability to take out another loan.

Whether you are applying for home loans or personal loans, there are options available for getting the money you need. If you don’t fall under any of the aforementioned circumstances or if you have bad credit, you could also consider using a guarantor to increase your borrowing ability. A guarantor is someone that agrees to be responsible for your loan should you default on it. The guarantor’s assets will be taken into consideration when you apply, which can dramatically increase the amount of money for which you are eligible.

Learn more about low doc loans.