What Is A Low-Doc Home Loan?

If you’re a freelancer, contractor, small-business owner, or entrepreneur, you probably know the frustration of applying for a home loan only to hit roadblocks due to strict income verification requirements. Traditional home loans demand extensive paperwork like payslips, tax returns, and financial statements, but what if your income documentation doesn’t fit neatly into those boxes? Let’s talk about low-doc loans and what they mean for non-PAYG workers.

What Are Low-Doc Home Loans?

A low documentation (low-doc) home loan is a mortgage that is ideal for self-employed individuals or business owners who have a solid income but may not have the traditional proof that banks require. Instead of standard payslips and tax returns, you can provide bank statements, an accountant’s declaration, or Business Activity Statements (BAS) to prove your financial position.

If you’re in the process of buying a home and want to understand the key steps involved, here’s a helpful guide to walk you through it.

Who Can Get A Low-Doc Home Loan?

• Self-Employed Individuals: Those who run their own businesses often do not have the standard documentation traditional lenders require, such as 1-2 years of tax returns. Low-doc loans allow them to provide alternative income verification, making homeownership more accessible.
• Freelancers and Contractors: Individuals with fluctuating incomes or those who work on short-term contracts may find it difficult to provide consistent income documentation. Low-doc loans offer a way to secure financing without the need for extensive paperwork.
• Investors: Property investors who rely on rental income or have multiple income streams may benefit from low-doc loans, as these loans can accommodate various forms of income verification.

Am I Eligible For A Low-Doc Mortgage?

To qualify for a low-doc home loan, borrowers still usually need to demonstrate a steady income, albeit with less documentation than traditional loans require. The typical requirements for low-doc home loans are:

• Generally, the borrower must be self-employed in the same industry for at least a year.
  • We have lenders on our panel that accept self-employed borrowers with only six months of business operation, provided they have 12 months of prior employment in the same industry.
  • More competitive products may require the borrower to be self-employed for at least 24 months.
• Your ABN must be active or GST registered for at least six months, though some lenders will accept only a minimum of one year or two years.
• Alternatives to traditional income verification, such as BAS, business bank statements, and accountant’s letters, are generally accepted.
• Lenders require 6-12 months of BAS.
• For low-doc refinancing, borrowers will need a credit file without dishonours or arrears in the last three months to be considered.
• You have to have a strong credit score.

Different lenders have varying policies. The maximum LVR without risk fee is determined case by case, depending on the strength of the application.

Pros and Cons of Low-Doc Home Loans

The pros of low-doc home loans are:

• Accessibility for self-employed and non-traditional earners
• Flexible documentation requirements, like business activity statements (BAS), bank statements, and accountant’s letters
• Potentially faster approval process

The cons of low-doc home loans are:

• Higher interest rates than full-documentation loans
• May require a larger deposit (typically 20%)
• Limited lender options
• Risk fee is usually required if you borrow at over 70% LVR
• Certain loan features, such as offset accounts, redraw facilities, and fixed interest rates, might be restricted or unavailable.
• Some lenders may charge additional, higher fees.

What Are The Differences Between Low-Doc And Full-Doc?

​Low-Doc and Full-Doc loans differ primarily in the amount of financial documentation required and the associated borrowing conditions.​

Full-Doc Loans are traditional home loans that require extensive financial documentation, including, two years of personal and business tax returns, Notices of Assessment from the Australian Tax Office (ATO) and two years of balance sheets and profit-and-loss statements. These loans generally come with lower interest rates and higher borrowing power.

In contrast, low-doc loans are designed for individuals, typically self-employed, who may not have standard financial records. Instead of tax returns, lenders may accept 6–12 months of BAS and 3–6 months of bank statements from personal and business accounts. While these loans offer greater flexibility, they often come with higher interest rates and may require a larger deposit or existing property equity.

For a more detailed comparison, check out our Low Doc vs. Full Doc guide.

Is A Low-Doc Loan The Same As A Self-Employed Loan?

No, they are different. A self-employed loan is simply intended specifically for borrowers who run their own businesses. This can either be a low-doc or full-doc loan, depending on documentation availability.

A low-doc loan, on the other hand, is for someone who may not have or prefers not to provide traditional income documentation. Instead, lenders accept the flexible documentation options stated above.

This makes them ideal not only for self-employed borrowers but also for:

• Retirees relying on investment income
• Commission-based workers without fixed salaries
• Individuals earning foreign income without Australian tax returns

In short, a “self-employed loan” describes the borrower’s profile, while a “low-doc loan” indicates the type of documentation required and can cater to multiple borrower categories.