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Being self-employed or working on a contract basis can be rewarding in terms of flexibility and being able to watch your business grow, but it can come with some unique financial hurdles, not least if you want to apply to a bank or lender for a home loan.

As a general rule, many banks and lenders are reluctant to approve applicants who cannot show the kind of documents that you typically need for a home loan application – in particular, proof of employment in the form of payslips.

This means people who don’t receive a regular salary from an employer may wish to consider alternatives to a traditional home loan, which could include a low-documentation, or ‘low-doc’ loan. If you run your own business or are self-employed and wish to apply for a home loan, you may find that one of these loans is suitable for your needs, but it’s important to be mindful of their potential downsides as well .

What is a low-doc home loan?

Low-doc home loans are loans aimed at people who wish to purchase a home, but do not necessarily meet standard lending criteria. The phrase ‘low-doc’ is something of a misnomer, as it does not mean that you will need to provide minimal documentation; rather, it means that you will need to provide evidence of your income outside of the standard documents that lenders typically ask for.

Bear in mind that a low-doc home loan is not the same thing as a non-conforming home loan. Like traditional home lenders, low-doc lenders normally require borrowers to have a solid credit history, which is not necessarily the case with a non-conforming home loan.

In addition, financial regulator ASIC warns on its Moneysmart website that low-doc loans “are usually offered at higher interest rates and may include terms that restrict borrowers.”

Who can apply for a low-doc home loan?

Typically, low-doc home loans are aimed at self-employed people and people who run their own businesses. While the eligibility criteria will differ between lenders, it may often be the case that you need an Australian Business Number (ABN) to apply for one.

What documents do you need for a low-doc home loan?

If you plan to apply for a low-doc home loan, depending on the lender you choose, it is likely that you will need at least some of the following:

  • Bank statements from your business or personal accounts
  • Details of your business, such as its name and Australian Business Number (ABN)
  • Your Business Activity Statements (BAS) for the past 12 months
  • Your tax returns for the past two years from the Australian Taxation Office (ATO)
  • Information about any assets you own, such as investment properties
  • Information about any debts you might have

Some lenders may also request or accept a letter from an accountant, certifying that the accountant knows the details of your financial position, and can confirm that the information you have provided about your annual income is true. This letter must be signed and dated by the accountant, must be on the accountant’s letterhead (unless the accountant is signing a low-doc declaration provided by the lender), and must include details of how long the accountant has acted for you.

What size deposit will you need for a low-doc home loan?

Generally speaking, lenders consider low-doc home loans to be risky, so it may be the case that you need a deposit of at least 20% to purchase a property, whereas in other circumstances, lenders may be willing to offer a ‘full-doc’ or standard home loan to borrowers with a 5% or 10% deposit. Alternatively, some lenders may charge low-doc borrowers a higher interest rate on smaller deposits.

In the wake of COVID-19, some lenders may have lowered their maximum loan-to-value ratio (LVR) for low-doc loans, meaning you may potentially need an even larger deposit to be eligible for one, depending on the lender.

Are low-doc home loans harder to get since COVID-19?

Since the COVID-19 pandemic began, some lenders may have become more cautious about approving low-doc home loans, and may have tightened their approval criteria accordingly. In addition to limits on the maximum LVR, lenders may also want to know how the pandemic has affected your business and cashflow.

As part of your application for a low-doc home loan, your lender may ask you to provide a COVID-19 impact statement, outlining if and how your cash flow has been affected, and potentially also how you plan to guide your business through the COVID-19 recovery period.

Before applying for a home loan of any sort, including a low-doc loan, it could be worth consulting the lender’s Key Facts Sheet (KFS), Target Market Determination (TMD) and other applicable product documentation, to help you decide if the loan is right for you. You may also want to seek advice from a qualified professional.


Last updated: 22/10/2021

Author: Nina Tovey

As Canstar’s Editor-in-Chief, Nina heads up a team of talented journalists committed to helping empower consumers to take greater control of their finances. Previously Nina founded her own agency where she provided content and communications support to clients around Australia for eight years. She also spent four years as the PR Manager for American Express Australia, and has worked at a Brisbane communications agency where she supported dozens of clients, including Sunsuper and Suncorp.

Nina has ghostwritten dozens of opinion pieces for publications including The Australian and has been interviewed on finance topics by the Herald Sun and the Sydney Morning Herald. When she’s not dreaming up ways to put a fresh spin on finance, she’s taking her own advice by trying to pay her house off as quickly as possible and raising two money-savvy kids.

Nina has a Bachelor of Journalism and a Bachelor of Arts with a double major in English Literature from the University of Queensland. She’s also an experienced presenter, and has hosted numerous events and YouTube series.

You can follow her on Instagram or Twitter, or Canstar on Facebook.

You can also read more about Canstar’s editorial team and our robust fact-checking process.

Sub-edited by Tom Letts and Amanda Horswill. Follow Canstar on Facebook and Twitter for regular financial updates.

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