Low Doc Mortgage

Low Doc Mortgage

Low Doc Mortgage loan is a type of loan designed for people who cannot meet the usual documentation requirements, such as proof of income, assets, and liabilities. These people are usually self-employed. The Low Doc Mortgage loan provider will then rely on "self-verification," wherein the borrower will state income in writing.

There are extra conditions when availing of the Low Doc Mortgage loan. Often, the borrower ends up paying higher interest rates, and additional fees (called "risk fees") in a Low Doc Mortgage. They are also required to take out a Lender's Mortgage Insurance when borrowing up to 80% of property value. Loan borrowers are also sometimes required to offer additional capital security, such as a car, as security.

The one upside of the Low Doc Mortgage loan is that it offers less paperwork, and it provides loan opportunities to those who cannot normally qualify for a loan.

Low Doc Mortgage will benefit borrowers with existing equity and/or deposit saved. Borrowers who also have a bad credit history can apply for Low Doc Mortgage loans. People who fall in these categories should weigh the costs first before proceeding with a loan. Compared to other loan types, Low Doc Mortgage loans cost more, in the end.

Currently there are three types of low doc mortgage loans:

1. Self-declared Income - This is the more common type, and just requires a declration of income. Fees and interest rates are higher.
2. Account Statement - Lenders may just require an account statement from the borrower's accountant. This option offers fees and interest rates that are closer to the standard interest rates.
3. Asset Lend -This type of Low Doc Mortgage loan requires the least paper work. Loan is secured solely on the basis of the value of the property.