Home Loan Search

Cash out

corp-admin — Sun, 10 Jul 2011 07:50:56 +0000

Cash out refers to the release of equity in your home via an equity loan.

The approval of Cash out or equity release will be subject to the purpose of the funds (ie what you need the cash for) and the amount required.

Whilst cash out for debt consolidation and personal investment are generally acceptable, most lenders will not lend for business purposes or the payment of tax liabilities.

Note: For lenders who will consider the payment of Tax Liabilities and no cash out limit please contact Home Loan Search.

Lenders Mortgage Insurance (LMI)

corp-admin — Sun, 10 Jul 2011 07:50:35 +0000

Unlike standard loans, where LMI is charged over 80% of the value of the property, LMI on Low Doc loans is charged to the borrower above 60% of the property value.

Low doc loans have different LMI premium rates than standard loans and different lenders have different premiums. Some lender will also allow for the capitalization of mortgage insurance – meaning you can add the premium to you loan amount rather than paying it upfront.

Business Activities Statements (BAS) and Business bank statements

corp-admin — Sun, 10 Jul 2011 07:49:12 +0000

Most lenders now request Bas statements in support of the income declared on Low doc loans. Lenders require 12 months Bas statements (ie most recent 4 quarters), which must be obtained from the Australian Tax Office (ATO) Portal ie hand written Bas statements are not acceptable.

In some cases lenders accept business bank Statements in- lieu of Bas statements. Lenders will require 3 to 6 months trading statements to confirm declared income. Assessment and calculations of the income based on the bank statements also vary from lender to lender.

ABN and GTS registration

corp-admin — Sun, 10 Jul 2011 07:48:48 +0000

The self-employed applicant must have held a valid Australian Business Number (ABN) for a minimum of 2 years. It is acceptable for the ABN to be in the name of a company – provided the applicant is a director of that company.

The majority of low doc lenders will need proof that you have an ABN that was registered at least two years. However some bank and non bank lenders do not require an ABN or will accept 12 months registration.

GST (Goods and Services Tax) registration is also required if you are declaring an income of over $75,000.00 per annum. GST registration is often required for at least twelve months.

Low Doc Declaration and accountant letter

corp-admin — Sun, 10 Jul 2011 07:48:27 +0000

Low Doc declarations are the main source of income verification for Low Doc loans, in some instances the declaration is required to be signed by the borrower’s solicitor. The declaration is where the borrower declares the income earned.

Accountant letters are sometimes required to support the low doc declarations to explain borrower’s financial position, declared income and trading structure/status. Accountants letter are also used in Lieu of BAS, ABN and GST registration.

The letter provided must be on accountant letterhead, signed, dated and no more that 3 months old.

Up to 80% Low Doc Loans

corp-admin — Sun, 10 Jul 2011 07:48:04 +0000

Low doc loans can be used for residential, investment or Commercial property purchases. Borrowing is generally restricted to a maximum of 80% of the value of the property or 82% with capitalised Mortgage Insurance (See LMI Below)

In some cases the Loan to value ratio (LVR) will be limited to as low as 60% depending on the supporting evidence available and the overall strength of the application. 60% Low Doc loans are seen by the banks as less risk and offer greater flexibility and increased chances of approval.

Note: Some second tier lenders or non conforming lender can offer LVR’s of up to 90%, however these are generally at a much higher interest rates than standard Low Doc loans.

Interest Rate and Products

corp-admin — Sun, 10 Jul 2011 07:46:15 +0000

Although traditionally Low Doc loans have come with higher interest rates, most lenders are now offering the same features and rates to that of standard (fully verified) loans. This changes when the Loan to Value ratios increase or the requested income declaration requirements cannot be met.

Low Doc Loans offer a wide range of products and features including Offset accounts, interest only, redraw and much more.

Depending on the type of low doc loan and the amount you borrow you may be eligible for a significant rate discount

Up to 90% of the property value

corp-admin — Wed, 22 Jun 2011 09:46:57 +0000

Refinances are generally limited to 90% of the value of the security property (ies) that is offered. Some lenders will allow mortgage Insurance to be capitalized (to 92%) or added to maximum loan to value ration.

Generally speaking however, it is preferred to stay below 80% and avoid mortgage insurance which could have an impact on the costs of the refinance.

Costs of refinancing

corp-admin — Wed, 22 Jun 2011 09:46:40 +0000

You may have to pay early exit fees on your existing loan such as a Deferred Establishment Fee (DEF), Discharge Fee, Early Termination Fee or Break Cost (fixed rate loans only). These exit fees usually only apply for the first few years that the loan is open

When you look to refinance your Home Loan Search mortgage broker will consider the long term benefits against the actual costs associated with switching lenders.

Refinancing costs are sometimes offset by incentives from the new lender.

Product switches or restructure

corp-admin — Wed, 22 Jun 2011 09:46:19 +0000

As financial circumstances change, refinancing often provides the customer with the ability to restructure their loan to suit their changing needs.

One of the most common reasons for product switching is to switch from a fixed to variable rate loan, or vice-versa. Other reasons include the need for different product features (e.g. Offset account) or simply change the structure of your loan (e.g. from Interest only to principle and interest).

As there are no hard and fast rules on what product and structure is best, your Home Loan Search mortgage broker will conduct a detailed needs analysis before making any recommendations.