Glossary of Business Terms - Low Doc Loans |
Low
Doc Loans : Are mortgages that
require much less documentation or proof
of income than a regular
mortgage. Low doc loans in Australia
are similar in nature to Subprime
loans in the United
States.
Low documentation
loans in Australia are most suitable for
small
business owners, self-employed, or casual
workers that have a deposit, assets, and
employment, but may struggle with showing
a regular income or the tax returns that
a traditional mortgage
requires.
The borrower must still have an income,
but it is verified in writing by the borrower,
rather than the lender. This added risk
by the bank or lending company is covered
with a higher interest rate than the traditional
home loan. Bank fees and charges are often
higher than traditional mortgages also.
Most lenders require the borrower to have
a 20% deposit for the loan, which is an
LVR (Loan to Valuation Ratio) of 80%. Mortgage
insurance is also required by most lenders
for those that borrow more than 60% of the
loan.
Also called : Low documentation loans,
Lo doc loans, Limited documentation, and
Lodocs.
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