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Low Doc Home Loans
Home Loan Interest Rate Types
There are two main types of home loans: the fixed home loans and the variable home loans. Fixed home loans carry a fixed repayment amount that cannot be adjusted despite the changes in the interest rate that is triggered by the official cash rate. This loan type gives you repayment stability throughout your loan term.
The fixed home loan is ideal for those who would like to budget their finances strictly. Since the amount that must be allotted for the home loan is already determined, the excess can be used for other expenses. However, extra repayments are usually not allowed for this type of loan.
On the other hand, a variable home loan has changing repayment amounts because it depends on the changes in the official cash rate, determined by the Reserve Bank of Australia. If the rates go up, repayments go up as well. Likewise, the rates go down if the cash rate goes down.
However, most borrowers avail of loans under this type because of its flexibility features such as the redraw facility and extra repayments. Since they tend to have more features than a fixed home loan, its interest rates are higher than that of its fixed counterpart.
If you cannot decide on having a solid fixed home loan or a solid variable home loan, you may avail a split home loan which carries the features of both the fixed and variable home loan. Through the split home loan, you can enjoy the stability of the fixed home loan and the flexibility of the variable home loan.
Meanwhile, interest only home loans give its borrowers some leeway by letting pay only the interest of the home loan for a period of one to five years. The borrower must use this period to save as much as he can for he will eventually repay the principal amount of the loan after the interest-only period. This loan can cut down the costs for purchasing a property but lenders will determine your capacity to pay.
Start-up families or up-start businesses would enjoy the features of the honeymoon home loan for it is paid under a low interest rate and repayment amount for a honeymoon period of about six months to one year. During this period, an offset account is also created for you. However, the rates go back to standard levels after the honeymoon period and this loan is tagged with high interest for lenders view it as a risky deal.
It is impossible to have a no deposit home loan which gives the borrower a chance to have the full purchase amount of his desired property. This option also makes the borrower eligible for the First Home Owners Grant but this deal entails additional fees such as conveyancing costs and stamp duty fees.
And lastly, the Line of Credit or equity home loan gives you a pre-set limit that does not change. Your repayments can be added to the equity which you can eventually use for renovation and construction expenses as well as in investments for other residential or commercial properties.
Due to the funds that a borrower can use, this home loan type has an interest rate that is slightly higher than normal. Also, the capability to redraw funds will prove to be costly if the borrower will not use it properly. Therefore, financial discipline is still needed despite the readily available funds.
Low doc home loans make it easy for the self employed, credit impaired and small business owners
Low doc home loans are ideal for self-employed persons or small business owners who often have more complex financial affairs. No certainty of a regular income, having to arrange your own sick pay and pension and probably having to work long hours are challenges that salaried workers never experience. On top of this, if you are self-employed, you may find it hard to get a traditional home loan simply because you don't have all the paperwork to verify your income.
Low doc loans cut through red tape
Low documentation loans, also know as "low-doc" or "lo-doc" loans, are designed for self-employed people. Self-employed people often lack the documentation required to get traditional home loans. Low doc loans are different to normal loans in several ways.
Low doc loans are easier to obtain
As low doc loans require less documentation they are often easier to obtain. The interest rate is usually higher than the standard variable rate. Low-doc loans also generally carry a requirement for mortgage insurance which can make them more expensive. There may also be limits on the amount you will be able to borrow (ranging from 60 to 80 percent of the value of the property). Talk to Australia's leading lo doc mortgage provider to obtain exact details on the limitations of low doc loans.
We recommend the stamp duty calculator at www.stampdutycalculators.com.au.
Low doc home loans are fast
Now that many online lenders offer low document home loans, these loans are faster to obtain due to the lower documentation requirements.
Are you Credit-impaired?
If your finances are focused on growing your business and this leaves you credit-impaired you can still access non-conforming loans. Non-conforming home loans provide most of the features of regular loans, including variable, fixed and split rate loans, as well as line of credit, redraw and offset. However they generally have a higher interest rate due to the higher risk.
You may wish to also view your own a credit report to see what is on your credit file.
