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Low doc home loans

Low doc (low documentation) home loans are designed for self-employed borrowers, freelancers, and contractors who do not have traditional payslips or up-to-date tax returns to verify their income.

 

Loan Market Self Employed Home loans

While standard home loans require two years of complete financial statements and tax returns, low doc loans allow self-employed Australians to prove their repayment capacity using alternative income evidence -such as Business Activity Statements (BAS), business bank statements, or an accountant’s declaration.

Because low doc loans carry a higher perceived risk for lenders, they typically require a larger deposit (usually at least 20%) and may feature slightly higher interest rates or fees. Having a strong credit score alongside your alternative documentation is crucial to securing competitive terms.

When would you consider a low doc home loan?

A low doc loan is an effective financing solution if you have a reliable income and strong cash flow, but your current paperwork doesn’t fit standard bank assessment criteria. However, because interest rates and fees can be higher, low doc loans should be evaluated with the help of a mortgage broker who can confirm whether alternative standard options exist. 

Here are some common scenarios where a low doc loan might be suitable:

  • Recently self-employed – Many lenders require at least two years of tax returns to assess self-employed income. If you have a solid income but haven’t been in business long enough to meet these requirements, a low doc loan could be an option.
  • Irregular income – Some self-employed professionals and business owners have fluctuating incomes that don’t fit the standard assessment criteria. If their bank statements or business activity statements (BAS) show consistent earnings over time, a low doc loan could help them secure finance.
  • Tax-minimisation strategies – Many business owners use legal tax strategies to reduce their taxable income, which can make it difficult to meet traditional lending criteria. A low doc loan allows lenders to assess their true income using alternative documentation.
  • Property investment opportunities – If a self-employed person wants to seize an investment opportunity but doesn’t have up-to-date financials, a low doc loan might enable them to act quickly.

How much of a deposit do you need for a low doc loan?

Low doc loans generally require a larger deposit than standard home loans. While a full-doc borrower might be able to secure a home loan with as little as a 5% deposit, low doc borrowers typically need at least 20%. In some cases, lenders may require a deposit of 30% or more, depending on the borrower’s financial position and the lender’s risk appetite.

The reason for the higher deposit requirement is that low doc loans carry more risk for lenders. Without traditional financial documentation such as tax returns and payslips, lenders rely on alternative evidence like business activity statements (BAS), bank statements and accountant declarations. To offset this risk, they require borrowers to contribute more upfront.

There are some exceptions where borrowers may be able to access a low doc loan with a smaller deposit, but this usually comes with stricter lending conditions. For example, lenders may charge higher interest rates, require lenders mortgage insurance (LMI) or limit the loan amount.

For self-employed clients, the key to securing a low doc loan with a reasonable deposit requirement is to have strong alternative documentation, a good credit history and a solid financial position. Some lenders are more flexible than others, so it’s important to explore different options.

What is the minimum credit score required for a low doc loan?

Low doc loans don’t have a universal minimum credit score requirement. Instead, lenders assess applications based on their own risk criteria, which include credit scores but also other factors such as income verification, deposit size and overall financial position.

Credit scores in Australia vary depending on the credit reporting bureau:

  • Equifax – Scores range from 0 to 1,200. A ‘good’ score is generally 661 or higher.
  • Experian – Scores range from 0 to 1,000, with 625 or higher considered ‘good’.
  • Illion – Scores range from 0 to 1,000; a ‘good’ score typically starts at 500.

 

For a standard home loan, most lenders prefer a credit score in the ‘good’ range or higher. With low doc loans, the requirements are often more flexible, but a borrower with a poor credit score may still struggle to get approved or may face higher interest rates and stricter lending conditions.

Lenders assess risk on a case-by-case basis. A strong deposit, solid alternative income documentation and a history of meeting financial commitments can help offset a lower credit score. Some non-bank lenders specialise in working with self-employed borrowers who have lower credit scores, but these loans often come with higher fees and interest rates.

Five ways to increase your credit score before applying

A strong credit score improves your chances of securing finance, whether it’s a standard home loan or a low doc loan. For self-employed borrowers, a higher credit score can mean better loan options, lower interest rates and fewer restrictions. Here are five ways you can improve your credit scores:

  1. Pay bills and debts on time. Payment history is one of the biggest factors in a credit score. Late payments on loans, credit cards or utility bills can harm a credit score, while consistent on-time payments improve it. Setting up direct debits or reminders can help avoid missing due dates.
  2. Reduce credit card balances. High credit card utilisation – using a large percentage of the available credit limit – can negatively affect a credit score. Clients should aim to keep their balances low relative to their limits, ideally below 30% of the total credit available.
  3. Limit new credit applications. Every time someone applies for a loan or credit card, it generates a credit inquiry, which can temporarily lower their score. If someone applies for multiple credit products in a short period, lenders may see them as a higher risk. 
  4. Check credit reports for errors. Mistakes in a credit report, such as incorrect personal details or unrecognised credit inquiries, can unfairly lower a score. These kinds of mistakes are more common than you may think. Consumers can request a free credit report from Equifax, Experian or Illion every three months and dispute any inaccuracies.
  5. Consider closing unused old credit accounts. While a longer credit history can improve a score, there are cases where closing old, unused credit accounts can actually benefit a credit score. This is especially true if those accounts have high credit limits but are not being used, as it could help improve the credit utilisation ratio.

Why work with a Loan Market broker to choose your rate structure?

Deciding between a fixed, variable or split rate isn’t just about picking an interest rate. It’s about matching your mortgage structure to your career, lifestyle and financial plans.

  • Unlike banks, which can only offer their own products, mortgage brokers are legally bound by Best Interests Duty to prioritise your goals when recommending a rate structure.
  • Some lenders offer 100% offset facilities on fixed rates or allow unlimited extra repayments on split loans. Your broker compares options across 100+ lenders to find these rare product features.
  • Your broker can analyse your income patterns and savings rate to calculate the exact percentage split that maximises interest savings while keeping fees low.
  • When a fixed term ends, lenders often roll borrowers onto high standard variable rates. A Loan Market broker monitors your fixed-rate expiry dates to renegotiate your rate or refinance before rate shock hits.

Ask a Loan Market broker for more advice around low doc loans.

 They can answer any questions you might have, crunch the numbers for you and help determine the right solution for your situation.

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FAQS

Common questions about low doc loans.

What alternative documents are accepted for a low doc home loan?

Instead of traditional tax returns and ATO Notices of Assessment, lenders typically require a combination of:

  • Business Activity Statements (BAS) registered with the ATO (usually covering the last 2 to 4 quarters).
  • 6 to 12 months of primary business account bank statements.
  • An Accountant’s Declaration form signed by a registered CPA or Chartered Accountant confirming your turnover and profit margins.
  • Valid ABN and GST registration verification (usually active for a minimum of 6 to 12 months).
Can I get a low doc loan if I’ve been self-employed for less than two years?

Yes. While major banks typically require a minimum of two years of self-employed trading history, several specialist and non-bank lenders offer low doc solutions for borrowers who have been trading under an active ABN for just 6 to 12 months, provided you can present strong BAS or bank statement history.

Can I refinance a low doc home loan later?

Yes. Many self-employed borrowers use a low doc home loan as an initial stepping stone to purchase property or access equity. Once your accountant completes two full years of tax returns showing sufficient income, your mortgage broker can help you refinance to a standard, full-doc home loan with a lower interest rate.

Can I use a low doc loan to buy an investment property or commercial property?

Yes. Low doc home loans are available for owner-occupied residential properties, residential investment properties, and commercial property loans. Loan terms and deposit requirements vary depending on the asset class and location.