Buying without serviceability

Low doc loans are used by self employed to borrow 60% of property value. Can these loans be used to buy when you have hit serviceability ceiling?

Say a couple go from two incomes to one, (thus the income is not sufficient to cover the current loans in the point of view of the bank) can they still buy if they have sizable deposit? (Probably from different bank?) If so, 40% deposit enough?
 
In essence the law states that in order to lend money, the bank has to make reasonable enquiries to ensure that you can afford the loan. The banks have interpreted this to mean that borrowers must demonstrate that they can afford the loan.

It doesn't matter how much deposit you have. If you don't have the income to service the loan, you can't service the loan.

Even in a lo doc situation, you still need to show that you can afford the loan, the method the banks use to prove this are simply different. Lo doc loans are for people who are self employed. The banks verify the income via accountants letters, business and personal trading accounts and BAS statements.

If you're not genuinely self employed, you're not going to qualify for a lo doc loan at all.

Even if you are self employed, most people who do qualify for a lo doc loan can also qualify for a full doc loan if the effort is made.
 
The two boxes that need to be ticked for finance to be considered are;

l. Sercurity

2. Serviceability

If not ticked you cant pass GO.
 
Low doc loans are used by self employed to borrow 60% of property value. Can these loans be used to buy when you have hit serviceability ceiling?

Say a couple go from two incomes to one, (thus the income is not sufficient to cover the current loans in the point of view of the bank) can they still buy if they have sizable deposit? (Probably from different bank?) If so, 40% deposit enough?

Did your bank say you cant afford any more? With the right structure and choice of lenders can significantly improve your borrowing capactiy. If you were to go down the low doc path and declare an income higher than what you actually have then this is fraud!!
 
Agree with Jon Lodoc loans certainly are not for those who have hit the serviceability wall.

They are for self employed applicants who cannot provide the required documentation to meet normal lending criteria.
 
borrow extra while you can and park it for when your circumstances change.

all good advice.

Inreasingly though, we are all getting credit getting their noses out of joint if you want to retain a "buffer"

I find it amusing that a credit manager will often bin a financial planners advice to a hold buffer for some really dumb reasons.

I so agree with the " borrow money when you dont need it" philosophy.
ta
rolf
 
So it means more paperwork! Thanks for the info Aaron and PT.

Just bear in mind that lo doc tends to benefit those who are self employed in high turnover industries like retail that have high takings but lowish profit margin. Those in professional services with higher % profit but lower turnover tend to suffer for lo doc applications as banks tend to put a max 40% cap on profit from takings.
 
Yep DT. Probably I should just hold on to what we have and study to change jobs or something. Thinking of joining Tafe to study diploma of building or something. You are the inspiration :D
 
As all of you are suggesting to borrow as much as needed when we can, I have one more question.

Say we enter into a fixed price contract to build a house and the bank approves it. After the approval if the serviceability is lost (before or while the house is being built), can the bank stop making progressive payments?

(I reckon I am asking too many questions about loans and hopefully I won't end up becoming a MB one day :D )
 
Once approval is granted, I dont think they really care as long as the repayments keep rolling in.

When I built my ppor I just called my bank to approve progress payments at each stage, they just did do and don't ask anything.

What are you still doing up? :p
 
As all of you are suggesting to borrow as much as needed when we can, I have one more question.

Say we enter into a fixed price contract to build a house and the bank approves it. After the approval if the serviceability is lost (before or while the house is being built), can the bank stop making progressive payments?

(I reckon I am asking too many questions about loans and hopefully I won't end up becoming a MB one day :D )

Yes take the money know while you can get it!

Depends on how much info you divulge to the MB or bank as most lenders will ask if there are any life events that will effect your ability to repay the laon.

I read your last Singo and thought you would make a good broker :D
 
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