"Low Doc" and also "No Doc" loans are those where you require either little or no supporting documentation about things such as salary and savings history. Ideal for the self employed, small business owners, contractors, and so on, particularly where you do not have a long enough "trading history" to show to a traditional lender.
One of our resident brokers will know more about what the costs and so on are, but I believe that the rates are generally higher and there may be higher startup costs for these loans.
I think the general consensus is that if the deal is good enough, it is good enough to pay a higher interest rate for a low or no doc loan if that's what you have to do to finance the deal.
Fair comment in regard of the higher rates and the higher start up AND exit costs.
Rates tend to be higher and LVrs a litle lower because the lender perceives theynare taking on a little more risk.
Recently though, many "mainstream" lenders are entering the Arena, such as Adelaide Bank, Suncorp, ING and HSBC to name a few, where the products are becoming more and more flexible, indeed Suncorps new process provides for STANDARD rates and products with LVRs up to 80 %. Serviceability problems should be a thing of the past with these types of products.
Boy, is that good news Rolf. My partner and I are both self-employed, and dealing with the banks is an absolute nightmare. If you are a director of a company that runs at a loss (even if its just "on the books") then forget it. They say the directors may get sued. Now, I know the chances of a director getting sued over trading debts is far less than a regular employee getting retrenched (that's why you set up a company), but the banks don't seem to care. Show 'em a regular payslip and they are happy, even if you have been in the job 5 microseconds.
I dream of flexible lo doc loans with moderate rates and fees. Sounds as though my dream may be coming true.