Good Home Loan Tips: LMI

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Thursday, September 20, 2012

More Information About Low Doc Home Loans

Low docs are specially implemented for those who are unemployed. This will still require an application in writing and to sign a loan agreement. The only difference it has from other home loans is that you don’t need to provide and evidence of your income. Instead, you just have to sign a declaration regarding your income and your ability to meet the payments. This process is called “self-certification”. And that you have met your lender’s requirements, you won’t need to report your financial statements as well as tax returns.

Most lenders particularly in Melbourne, Australia allow borrowers to apply for low doc home loans whether in refinancing your home or buy property for investment purposes. Moreover, if you have been in the same business for at least two years, lenders will allow you to use the funds for the following:

Buy a business
Fund for business expansion
Purchase plant
Buy equipment, fixtures, fittings, machinery or cars; or
Refinancing a business loan

What’s makes this good news is that it is absolutely a cheaper alternative to bank overdraft or secure business loan.

Low doc loans actually have the same features as a standard home loan. For one, low doc loans also offers choices to borrowers whether they prefer variable or fixed rate options. In addition, it also has features that standard home loans have such as offset facility and redraw.

Furthermore, low doc loans are a bit more risky than of the standard home loans. One needs to fully meet the requirements of the lender. Another difference of low doc loans from the latter is you typically have to deposit a larger amount than you should have with standard home loans.

One of the requirements for low doc loans is an ABN and that you have been in the same business for at least two years. But if you still have many questions about this loan and of you are not quite sure if you would ever qualify, just contact your lender.

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Wednesday, September 19, 2012

Different Standards and the Types of Savings Considered as Genuine Savings

Lenders in certain countries around the globe have introduced the idea of genuine savings for a loan application. Genuine savings policies are for everyone who wanted to apply for home loans the easier. The origin of this implementation is to respond the proliferation of first time home buyers that were applying for home loans with no savings or no deposit.

There are different standards that genuine savings that were made by lenders across the country. These are:

Some lenders would require 3% of the purchased value of the property which is usually applied to every first time buyers.
Other lenders would require 5% of the purchased price of the house that should be saved before being approved to buy it.
Others would ask for 5%of the purchased price for a loan which is 80% at least o the value of the price. However, this will also depend both on the LMI product and the lender.
Some would not require genuine savings for mortgages that are almost 90% of the price of the property.

Furthermore, the following types of savings are considered as genuine savings but only if they will add up beyond 5% of the purchased value:

Savings which are mounted up for three months
Term deposit for three months
Shares or managed funds held for three months
Equity acquired in real estate but will depend on the lender

Ever wonder why they have put such restriction in home loans? It is for the reason that the lender will be put at risk if a borrower will fail to pay the loan. A lender who does not have a genuine deposit handled on a loan will have the possibility to not being paid back for a claim. Therefore, the lenders should implement the genuine saving standard.

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Tuesday, September 11, 2012

Is Low Doc Home Loan Fit For You?

Low doc home loans are designed for people who are self employed and who are incapable of proving their revenues by typical means. Generally, it is for people who do not qualify for traditional home loan to purchase a property. This is a type of home loan that can be approved without the regular income verification requirements but is a necessity if you are unable to have recent tax returns or any financial statements. Low documentation needs the application to be made in writing yet you don’t need to provide much paperwork such as that of proof of income, assets and liabilities. This mainly relies on a self-verification method in which you can state your income without any documentation needed.

If you are a person who have some existing equity or a deposit saved or have some trouble presenting a proof of your regular income, then you can benefit from this low doc loans. And basically, this applies to all self employed or casual workers. This can also be applicable to people who hold bad credits. However, the availability of low doc home loans is sometimes abused by people who actually have income but have been removed them when they report to the taxation office. If this offense is caught, they are charged to pay greater than the saving they should be making upon breaking the law.

Low Doc mortgage

In this modern day, low doc home loans have become more flexible than the previous years. Self employed borrowers are required to have a valid ABN that has been active at least for the last two years. However, this should also be registered for GST.

PAYG (pay as you go) are not recommended for anyone who has a stable job. If you have it (PAYG) yet cannot support with their income pay slips, there can be alternatives that will still allow you to borrow without proof of your income.

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