Lo Doc Loans: 60% LVR

What are we talking about when we use the phrase “60% LVR lo doc loan?” There is plenty of jargon in there that the average person might not be fully aware of. The LVR stands for loan to value ratio. To say that a loan has a 60% LVR is to say that the value of the loan is 60% of the value of the home, meaning that you would have saved up a deposit that is worth 40% of the value of the home.
To say that it is a lo doc loan is to say that the borrower either can’t or prefers not to provide proof of their income. Lo doc essentially means that you will not be required to provide as much documentation as you normally would. Rather than offering proof of your income, you will simply declare it.

Putting all of this together, a 60% LVR lo doc loan is a loan where you would save up a 40% deposit and you would declare your income rather than supplying documentation of it. This option is intended for people who are self-employed, where it is difficult to provide reliable documentation of your income.

Are Lo Doc Loans with a 60% LVR Still Available?

For the majority of types of loans, the answer to that question is still “yes.” Lenders who are willing to provide this type of loan are still quite numerous, and include national banks, local banks, and non bank lenders.

Since banks are often hesitant to work with people who will not or cannot supply proof of their income, it is a good idea for a borrower to get in touch with a mortgage broker. A broker is your “inside man” (or woman). They know which lenders will be willing to work with you, and which ones will offer you a fair deal, rather than trying to charge you unfair interest rates by exaggerating the risks of your situation. In many cases, brokers also have special deals worked out with the lenders, allowing them to offer you loans that you wouldn’t be able to receive otherwise.

Since you are providing a 40% deposit, the risks to the lender are minimal. In the unlikely situation that you were unable to pay off your loan, the bank would be forced to take possession of the property and sell it. With a 40% deposit, the odds that they would still make a profit or at least break even are very high. With this level of security, many lenders are willing to offer a loan with terms very similar to the loans they would offer their “normal” customers.

That said, none of this means that lenders will offer a loan to anybody with enough equity. They still prefer not to kick people out of their homes, nor do they enjoy trying to sell homes on the market. Selling homes isn’t a bank’s job, after all.

Do You Need to be Self-Employed?

At this point, you do. In the past, it was possible for PAYG employees to apply for a lo doc loan, but this option is no longer available. Consumer credit protection laws have been introduced that make this type of loan illegal in the vast majority of cases.

Is it Possible to Refinance with a 60% LVR Lo Doc Loan?

In most cases the answer is “yes.” Lo doc loans with an LVR higher than 60% often require lender’s insurance because the lender feels that they are in a position of risk. But with a 40% deposit, the risks are much lower, and you will typically be able to refinance as long as you have a reasonable reason to do so and your financial situation looks good.

Will Bank Account Statements or a BAS Be Required?

In many cases, they will be, but the answer to this question will actually depend on which lender you are working with. There are some lenders who will be willing to offer this type of loan without either form of documentation. These lenders can be quite difficult to find, so you will want to talk with a mortgage broker if you feel that this is a necessity.

That said, it is often a good idea to provide this information anyway. There is no benefit to getting approved for a loan that you cannot afford to repay. Defaulting on a mortgage means that you will lose your home, and that your credit rating will be destroyed for many years to come.

It is also wise to keep in mind that the less documentation a lender asks for, the more likely it is that they will charge you higher interest rates. They are putting themselves at risk by not asking for any kind of verification. Lenders that are willing to do this have to make a profit one way or another.

Learn more about lo doc loans.