Can I get a low doc loan with a default?
How the two risks combine
Lenders score a file on income verification strength, credit history, LVR and security. Low doc weakens the first; a default weakens the second. Specialist lenders offset that by tightening the third: the lower the LVR, the more they will tolerate. A paid default under $2,000 that is more than two years old might still get 80 per cent. An unpaid default from last year for a five figure amount will be capped closer to 65 or 70 per cent, with the default paid from the loan at settlement.
What the lender wants to see
- Twelve months or more of ABN and GST registration, with BAS lodged on time
- Six to twelve months of BAS or business bank statements showing consistent turnover
- An explanation of the default with supporting documents, and evidence it is paid or will be paid at settlement
- Clean conduct on your existing mortgage or rent for the last six to twelve months
- A property in a metro or major regional area that is easy to value and sell
What it costs and how to exit
Expect a rate loading and possibly an establishment or risk fee in place of LMI. The strategy is the same as any specialist loan: hold it for twelve to twenty-four months with clean repayments, pay the default, and refinance to a near-prime lender once the file has improved and the business has two years of tax returns. Avoid long fixed terms and check the exit fees before signing.
Not sure which lender fits your situation?
Get help with self-employed and low doc lending
Self-employed income is assessed differently by every lender. The same set of financials can be declined by one lender and approved at a higher amount by another. We connect you with a finance specialist who reads self-employed files for a living.
Property Finance Help connects users with finance professionals who can help review the finance pathway for the property, loan purpose and lender policy fit.
Property Finance Help is a lead generation service, not a lender, broker, or financial adviser. All information on this website is general in nature and does not take into account your personal objectives, financial situation, or needs. Consider seeking independent professional advice before making any financial decision.
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