For many people, the perks of working on their own are worth it. But as these individuals get ready to apply for a home loan in order to buy their dream house, they often find that being self-employed can be an obstacle when dealing with banks and other lenders who want more security on investments before granting loans.
The low doc home loans in Australia are an excellent option for those who are self-employed and looking for an affordable loan option. These loans have fewer documents’ requirements, so it’s easier to get approved, which is perfect for those who don’t have a regular income or employment history. The best part about these low doc loans is the ability to make monthly payments; it implies that the borrower doesn’t need to pay a massive amount at once.
The key considerations to watch out for Self-employed home loans
The lender’s conditions for self-employed home loans are more restrictive than standard loans, presenting a higher risk for lenders. So, below are the essential considerations to look at in the application form to determine eligibility to secure the loan.
- Greater Loan-to-value ratio (LVR):
Since LMI (lenders mortgage insurance) premium will only apply for a loan having LVR over 60%, most Australian lenders will lend up to 60% of LVR. However, some may take it as high as 80%. These few lenders are more likely to charge higher interest rates.
- Australian business number (ABN) registration:
In order to qualify for a low-doc or self-employed home loan in Australia, borrowers’ self-employed status needs to be verified. Low doc loans are available with an LVR of 60% or less as long as they have been registered in the ABN system for more than one year and can show proof that they’re still working as the same.
- Interest rate:
In some cases, the borrower may have to pay a higher rate to compensate the lenders for low-doc loans that are riskier. However, the interest rate still depends upon the lender and the type of supporting documentation or verification provided by the borrower.
- Good Credit History:
Lenders are often not able to fully verify income levels for borrowers who apply for a home loan. Therefore, a lender prefers to look for credit history to determine an applicant’s ability and willingness to pay them back. Moreover, lenders look at the age of any defaults, and if they’re old enough, this will make the borrower a favorable candidate for loan approval.
- Property Location:
Lenders and mortgage companies are picky with the types of properties. They are more likely to approve prime security properties in highly demanded locations like capital cities and regional centres. On the other hand, they are reluctant to accept unique properties or properties in disrepair that are difficult to sell.
Conclusion: While it seems a little complicated to get a home loan as a self-employed borrower, a borrower can easily get verified to secure a home loan by following the point mentioned earlier. Getting a loan can be easier than you’d imagined with a home loan broker in your corner. Speak to Your Finance Adviser today to determine suitable loan options based on your financial situation.