It’s a little known fact that you can still obtain a Low Doc Construction Loan if you know who to ask.
Who not to ask for a low doc construction loan are the big banks who long ago deserted the self-employed. In doing so they have allowed some specialised lenders to flourish and offer some excellent tailored lending solutions.
What is a low doc construction loan?
For a number of reasons, a self-employed person may not be able to demonstrate their current income the way most lenders expect them to in order to lend them money. That would usually be their business and personal tax returns and financial statements for the last two years, ATO issued assessment notices for the same period and more.
When this is the case and even though they may be perfectly able to service the loan they are seeking, these applicants will be rejected by mainstream lenders and therefore miss out on opportunities: buying a family home, buying an investment property, releasing some equity to grow their business or whatever else they wish to use the loan proceeds for.
Fortunately, some lenders have a better understanding of self-employed people’s lives and can offer a unique low doc construction loan where they can verify one’s income more pragmatically and with more flexibility, allowing them to get a more accurate and timely picture of a person’s financial position and hence lending to that person if it is suitable to do so.
These lenders rely on different or less documentation, ranging from the applicant’s declaration to statements from their trading account or their most recent Business Activity Statements (BAS). It’s not only what the lenders require that is different, but also how they read and interpret the information.
The net result is that for most borrowers who have been self-employed for more than two years and are not seeking high loan-to-value ratio options, borrowing is no real issue in most cases although can be a little more expensive.
Why are low doc construction loans only offered by a few providers?
Things do get a little more complicated with a low doc construction loan as they require construction progress payments. Unfortunately, most of the low doc lenders will not offer you a low doc construction loan, which makes them a niche product with just a handful of providers offering them.
In general terms (at the time of writing), an applicant for a low doc construction loan could expect the following terms:
- Loan term: up to 30 years
- Interest rate: from 4.94% to 7.19%
- Fees: from $1,400 one-off establishment fee and $10 per month ongoing
- Loan to value ratio: up to 80%
- Minimum income verification document: an Accountant’s declaration
How can I obtain a low doc construction loan?
Our partners at Low Doc Loan Experts specialise in obtaining finance for self-employed people regardless of the documentation they have available to support their application. If you are self-employed and cannot secure a construction loan from your bank, contact Low Doc Loan Experts using this form or call 1300 781 680.