Low doc loans are designed for borrowers who have some existing equity or a deposit saved, but are unable to demonstrate evidence of regular income. This is equally applicable to:

• The self-employed;
• Casual /Seasonal workers;
• Professional investors;
• Persons whose financials are not up-to-date.

If you fall into any of the categories above and wish to purchase a property, a low doc loan could be your best finance option. There may be extra costs involved with a low doc loan as many lenders will apply an increased interest rate when standard documentation is not produced on application.
Mortgage insurance costs are also higher with a low doc loan, which adds further to the cost.

Most low doc lenders will offer loans up to 80% of the value of the security property (80% LVR), although the more financial documentation you can present to the lender, the higher this percentage could be.

In the past the interest rates attached to Low Doc loans were significantly higher than the interest rates on standard loans and therefore were generally only used as a last resort. Today, Low Doc loans are far more affordable and in many cases come close to the rates offered on a full doc home loan.

Types of Low Doc Loans

1. Self declared income
2. Account statement  or  Accountant letter
3. Asset lend

Self declared income
This is the most common type of low doc loan. The applicant is asked to sign a declaration stating to the lender their annual income. The lender is willing to provide the loan on the strength of this declaration and usually they will not require any other evidence of the income declared.

Account statement or Accountant letter
This type of low doc is a little more strict in its income evidencing criteria however such loans may be most suitable in some situations where interest rate is of primary importance. Some of the lenders that use "self declared income" may require an accountant's letter if the applicant is self employed for less than 2 years.

Asset lend
This is one of the least stringent types of low doc loans. You are not required to state your income at all and the lending decision is made strictly on the basis of the applicants asset and liability position.

Generally the LVR on such loans is lower. They are also known as “NO DOC Loans”.