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Is There A Difference Between The Australian Low Doc Home Loans And Non Conforming Home Loans?
By Maya Pavlovski
As a consumer you are undoubtedly confused by the multitude of different home
loan products advertised by lenders and brokers. The use of clever marketing
tactics may lead you to believe that Low Doc loans and Non Conforming loans are
essentially the same – but this is not necessarily true. While both the Low Doc
and the Non Conforming products are primarily targeted at the self employed
borrowers and borrowers who would not normally meet the traditional lending
criteria – there are some specific differences.
Key Features of Low Doc Home Loans
Low Doc as the name suggests is a Home Loan where less financial supporting
documentation needs to be provided than with a traditional home loan. Tax
returns, Payslips etc are not required. This loan product was developed
specifically for persons who are working in their own business and due to work
commitments may not have had the opportunity to complete their tax returns as
they fall due.
Some lenders will require a letter from the borrower's accountant to
substantiate their income, others are happy with a simple statutory declaration
from the borrower.
The lender is prepared to provide a home loan to low doc applicants as long as
the applicant has a basically Good Credit rating. In some cases a couple of
small paid utility defaults would also be acceptable. Applicants with a recent
history of bankruptcy will not qualify.
Borrowers must demonstrate that they have accumulated some deposit towards the
purchase (a minimum of 5% deposit is required)
Low doc home loans are now available in Australia for both investment and owner
occupied purposes.
The interest rates on the Low Doc home loans may be marginally higher than the
full doc products. However this is progressively changing with a number of key
players in the Australian Home Loan market offering low doc loans at very
competitive rates.
Key Features of Non-Conforming Home Loans
Non Conforming Home Loans cater for borrowers who do not meet the lending
criteria of traditional lenders. It could be that a borrower has a history of
bad credit (even ex-bankruptcy), does not have steady regular employment, does
not have a deposit, is an overseas resident, is retired or a seasonal worker
etc.
As a rule, non-conforming product lenders are prepared to allow for a greater
risk regarding the particular circumstances of a borrower and will generally
charge a greater interest rate to compensate for such risk.
When choosing a loan product, be it a low doc home loan or a non-conforming home
loan all borrowers should to be mindful of all the loan features, not just the
interest rate charged.
Borrowers should also take into account the available re-draw options on their
home loan, account keeping fees, portability of the loan, ability to split the
loan, repayment options and much more.
If you would like to read more about Low Doc Home Loans or Non Conforming Home
Loans in Australia please visit
http://www.honeyloans.com.au or
http://www.webdeal.com.au About the Author Maya Pavlovski holds a Bachelor of Commerce Degree from Melbourne University and is a qualified CPA.
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