Low Doc Loans – Significant Changes That May Affect Your Application
The credit crisis has had a profound effect on how lenders look at their lending policy. Most lenders are making it tougher for borrowers to borrow funds and the case is no different for low doc loans. For those looking to borrow between 60 and 80 percent of the proeprties value they will find that interest rates will be higher and they will need to provide more documentation than ever before.
The main reason for this is that the mortgage insurers have dramatically changed their policy when it comes to low documentation lending. The new criteria is a follows;
- No Upfront Cash Out (up to $20,000 for some lenders)
- No Refinancing Investment Loans
- No Debt Consolidation
- 12 Months’ BAS Statements from ATO Mandatory
- GST Registration for at least 12 Months
Previously, when applying for a low doc loan it was a simple matter of signing a declaration stating how much you earn, you are self employed, the low doc applicant is the primary income earner, have an ABN for 1 or 2 years and if you earned over $75,000 be GST registered.
There is some good news and that is not all lenders are governed by the mortgage insurers. At the moment there is only one major bank that is still offering low doc home and investment loans under the old policy. Other lenders that work outside the mortgage insurers policy charge higher than normal rates and fees.
Time will tell if and when these lenders will change their policy in the future but for now it is more of a wait and see approach. I expect that the policy will tighten more as the economy tightens to reduce the risk of borrowers defaulting on their loans.
To find out more about low doc home and investment loans feel free to contact us
Interest Rates Tumble Again
December 2nd saw the Reserve Bank of Australia cut interest rates by another 1%. To the Australian consumer it means a reduction in their variable loan repayments but the full i
nterest rate cut will only be passed on by a few lenders.
In a swift decision, Commonwealth Bank and NAB decided to pass on the full 1% rate reduction while other lenders took their time in assessing whether they should follow or pass on part of the rate cut. As the days went on we heard the news trickle from each lender and below is a summary of how much each lender will reduce their interest rates this time round.
Commonwealth Bank, NAB, ING Direct, Heritage - 1%
RAMS, Suncorp – 0.90%
St George – 0.85%
ANZ – 0.83%
Westpac – 0.80%
Of all the lenders mentioned above, this leaves Commonwealth Bank, ING, NAB and Heritage Building Society with the most competitive home and investment loan products on the market and I expect them to be very busy in the next couple of months.
While it might be the case now that these lenders are offering lower interest rates, I expect the other lenders will reduce their rates or come out with special offers that will help them regain market share in the home loan sector.