If you run your own business, your tax returns don’t always tell the full story. Maybe your accountant hasn’t lodged the latest return yet, maybe the business has grown fast, or maybe you’ve just started out. A low-doc home loan is designed for exactly that situation.
Here’s how low-doc loans work, who they suit, and what to expect.
What is a low-doc home loan?
A low-doc (low documentation) home loan lets self-employed borrowers prove their income with alternative documents instead of the usual two years of tax returns and financial statements. You still have to show you can afford the loan. You just use different evidence to do it.
Low-doc loans are only for self-employed people. If you’re a PAYG employee, you’ll need to apply for a standard home loan with payslips.
What documents can you use?
Lenders usually ask for one or two of the following, depending on their policy:
- Business Activity Statements (BAS), often the last 6 to 12 months
- Business bank statements, usually 6 to 12 months, showing regular income coming in
- An accountant’s letter confirming your income and that your tax affairs are up to date
- A signed income declaration, where you declare your income and confirm you can afford the loan
You’ll also need the usual ID, details of your assets and debts, and proof of your deposit.
Who is a low-doc loan right for?
- Business owners whose latest tax return hasn’t been lodged yet
- People whose income has grown, so older tax returns understate what they earn now
- Contractors and sole traders with irregular income that’s easier to show through BAS or bank statements
- Borrowers who’ve been knocked back by a bank because their financials didn’t fit the standard checklist
What do lenders look for?
- An active ABN, typically registered for at least 12 months and often 2 years. Some specialist lenders will go shorter.
- GST registration if your turnover is over $75,000. Declaring income above that without being registered for GST is usually a red flag.
- A clean credit history, or a clear explanation for any past issues
- A deposit, usually at least 20%. Some specialist lenders will go to 90% of the property value, usually at a higher rate.
How do low-doc rates compare?
Low-doc loans have traditionally been priced a little higher than standard loans, often somewhere around 0.5% to 1.5% more. The gap shrinks, and sometimes disappears, if you have a larger deposit (borrowing 60% or less of the property’s value) and a strong credit history. Lenders mortgage insurance may also apply if you borrow more than a set percentage of the property value.
Many borrowers use a low-doc loan as a stepping stone. Once your tax returns are lodged and show your real income, you can refinance to a sharper full-doc rate.
Low-doc doesn’t mean low standards
Lenders still have to check that the loan suits you and that you can afford it. Expect questions about your business, your expenses and your plans. The more organised your paperwork, the smoother the process.
A typical scenario
Take a plumber who’s been running their own business for three years. Their income jumped this year, but last year’s tax return shows a much lower figure and the new one isn’t due for a few months. Rather than wait, a low-doc lender could assess their income using 12 months of BAS and an accountant’s letter, letting them buy now at 80% of the property value.
This is an illustrative example only. Every situation, lender and outcome is different.
Frequently asked questions
Can I get a low-doc loan with a small deposit?
Sometimes. Most low-doc lenders want a 20% deposit, but some specialist lenders will lend up to 90% of the property value. Expect a higher rate and lenders mortgage insurance.
Can I refinance a low-doc loan later?
Yes. Once your tax returns are lodged and support your income, refinancing to a full-doc loan can often get you a lower rate.
Are low-doc loans only for buying a home?
No. They can also be used to refinance, buy an investment property, or release equity, subject to lender policy.
Do I need an accountant?
Not always, but many lenders ask for an accountant’s letter, and having one makes your application stronger.
Talk to a broker who knows low-doc
Low-doc policies vary a lot between lenders. Getting the right one first time saves you time and protects your credit file. We work with self-employed borrowers every day and know which lenders will look at your situation properly.
General information only. This article doesn’t consider your objectives, financial situation or needs, and isn’t credit or tax advice. Home loans are arranged by Stratium Finance Group Pty Ltd (ABN 65 696 556 804), Corporate Credit Representative 578600 of Yellow Brick Road Aggregation Pty Ltd, ACL 390261. All loans are subject to lender approval, terms, conditions, fees and charges.
