Understanding Alt Doc Home Loans
Alt doc home loans (also known as low doc loans) are a very flexible lending solution for self-employed people who do not work regular jobs. This loan type has taken off in recent years to assist people who have been rejected by mainstream lenders/credit providers.Alt doc home loans have allowed thousands of Australians to access a home loan. This loan is specifically suitable for people who have assets as well as income, but cannot provide adequate financial statement or tax return as documented evidence of income. Here is a list of people who are suitable for the loan:
- Self-employed people who may only pay themselves a standard wage and run their business in a way that means they fall into a lower tax bracket to avoid income tax
- Property investors who may have varied income from month to month and from year to year
- Contractors and seasoned workers who don’t work regular jobs, and
- New Australians families who have just moved to Australia and may not have payslips or tax returns from the work they have been doing since they arrived in Australia
Income Verification Process
An alt doc home loan enables you to self-certify your income, where you state your income (i.e. what you make) on a “Declaration” document and, the lender/credit provider will NOT verify your income by using masses of documentation otherwise required such as tax returns, BAS statements and more.Restrictions on Alt Doc Home Loans
The conditions for alt doc home loans are more restrictive than standard residential home loans as they provide a higher level of risk to the lender/credit provider, for example:- You cannot borrow more than 85% of the value of the security property
- Any alt doc home loan can incur a lenders risk fee premium
Here is a list of factors that lenders/credit providers consider when determining the interest rates:
- Nature of and the security property type
- Location of the security
- Client credit history
- Loan size amount
- Aggregate of total exposure to the lender/credit provider
- If self-employed, the period the client has been in business
- Age of borrowers, and
- The purpose of seeking finance