It can be difficult to take out a home loan if you don’t meet the traditional documentation requirements. If you find yourself in this situation, low-doc home loans can provide an alternative pathway to property ownership. These loans are tailored for borrowers who can’t provide conventional proof of income, offering flexibility with documentation while maintaining similar features to standard home loans.

How is a low-doc home loan different from a standard home loan?

Also known as alt-doc home loans, low-doc home loans allow borrowers to provide different types of income verification as part of the approval process compared to standard home loans, which require full documentation such as detailed tax returns and payslips. Instead, alternative forms of proof can be used, including:

Proof of ABN and GST registration (often at least six months old)
Business Activity Statements (BAS) from the past six months or more
An accountant’s letter verifying income
Bank statements showing consistent income
Personal tax returns (requirements vary, often one or two years)
An income declaration form

As low-doc loans are also seen as higher risk, you may also face:

Lower borrowing limits: many lenders will only allow you to borrow up to $1million on a low-doc contract, though others may allow you to borrow more.

Higher deposits: though the average home loan deposit is 20%, on a low-doc loan, many lenders insist that you have a deposit of 40 or take out lender’s mortgage insurance (LMI).

Higher interest rates: most lenders will assess applications on an individual basis to determine the interest rate offered, but they are usually higher for low-doc home loans.

Other than this, a low-doc home loan is much the same as a regular home loan. You’ll still need to meet standard eligibility criteria, such as age, residency and credit score requirements. Depending on your lender, you may be able to choose between fixed, variable or split interest rates and have options for redraws, offset accounts and extra repayments.

How do I get a low-doc home loan?

Finding the right low-doc home loan lender can be challenging, especially since not all lenders offer this type of loan. You’ll also want to ensure they offer the features you need, whether that’s competitive rates or optional extras.

A home loan mortgage broker is often the easiest and most effective way to find a lender that suits your unique financial situation. Brokers have access to an extensive network of lenders, including those specialising in low-doc and alt-doc loans. They can help:

Save time: a broker will compare multiple loan options on your behalf, sparing you the effort and time spent researching individual lenders.
Find a better deal: a broker can help agree a deal tailored to your financial circumstances, helping you secure the most competitive rates and terms available.
Simplify the process: a mortgage broker will do the legwork for you, guiding you through the specific documentation and eligibility requirements for low-doc loans.
Assist with pre-approval: many brokers can help you get pre-approved for a low-doc loan, giving you a clear idea of how much you can borrow and strengthening your position when negotiating with sellers.

Once pre-approved, your broker can help you complete the loan application and final approval process, making the journey to property ownership as smooth as possible.

Can I refinance my low-doc loan to a full-doc loan?

If your circumstances have changed and you now meet traditional income documentation requirements, refinancing your loan from a low-doc loan to a full-doc loan could be a smart financial move. Transitioning to a full-doc loan can offer:

Lower interest rates: full-doc loans are typically less risky for lenders, resulting in lower interest rates compared to low-doc loans.
Increased borrowing power: with a full-doc loan, you may qualify for a higher loan amount, which could be beneficial if you're considering a major home renovation or other significant purchases.
Access to more competitive products: refinancing to a full-doc loan may give you access to a wider range of loan products and features.

To refinance your home loan, you'll need to apply for a new loan to replace your existing one. This involves gathering the necessary financial documents, such as payslips, bank statements and tax returns. You'll then submit a loan application to a new lender, who will assess your financial situation and determine your eligibility. Once approved, you'll sign a new loan agreement, and the lender will pay off your existing loan balance.

What other home loan options are available for low-doc applicants?

Low-doc loans are a popular option for borrowers who may not have the traditional documentation required for a standard home loan, but there may be alternatives available. This could include:

Non-conforming loans: designed for borrowers who face challenges qualifying for a standard loan due to factors like a poor credit history, irregular income or being retired. Non-conforming loans may have higher interest rates or stricter terms, but they cater to a broader range of circumstances. Unlike low-doc loans, which focus on alternative ways to prove income, non-conforming loans are primarily for those who don't meet standard lending criteria.
Guarantor loans: these loans use a guarantor, usually a close family member, who offers their property or savings as additional security. This can reduce the lender's risk and may help you secure better terms or lower interest rates, even with non-traditional income.
Waiting to qualify for a full-doc loan: if you’re able to, taking the time to build your documentation – such as collecting payslips, tax returns and financial statements – can enable you to meet the requirements for a standard loan and secure more favourable terms.

In the past, no-doc loans, which required no income documentation, were available in Australia. However, stricter lending regulations have led to their discontinuation, meaning no-doc loans are no longer an option for borrowers.

Pros and cons of low-doc home loans

Flexible documentation requirements

Borrowers can provide alternative proof of income, making these loans accessible to self-employed individuals and those with non-standard income.

Greater accessibility

Low-doc loans can open doors for borrowers who may not qualify for traditional mortgages due to the nature of their income or the difficulty in documenting it.