What is a low doc loan
A low documentation loan, commonly called a low doc or alt doc loan, is a home loan designed for borrowers who cannot provide standard income verification. Standard loans require PAYG payment summaries, group certificates, or two years of tax returns as proof of income. Low doc loans accept alternative documentation to verify income and serviceability.
The term alt doc (alternative documentation) is increasingly preferred in the industry because it more accurately describes the product. The income is real and verifiable, just through different means than traditional employment records.
Important distinction
Low doc loans are not for borrowers with unstable or insufficient income. They are for borrowers whose income is genuine and adequate but whose documentation does not fit the standard template. Lenders still assess serviceability. They just use different evidence to do it.
Who low doc loans are designed for
The primary market is self-employed Australians. Business owners, sole traders, contractors, freelancers, and consultants often structure their finances in ways that minimise taxable income through legitimate deductions. This can result in tax returns that significantly understate actual cash income. Standard lenders use the tax return figure, which may not reflect the borrower's genuine capacity to service a loan.
Others who may benefit from low doc options include borrowers who have recently transitioned from employment to self-employment and do not yet have two years of self-employed tax returns, and investors with complex income structures across multiple properties or business interests.
What documentation is accepted
The specific documentation accepted varies by lender, but common alternatives to standard tax returns include:
- Business Activity Statements (BAS): Most lenders accept 12 to 24 months of BAS lodged with the ATO as evidence of business turnover. The income is typically calculated as a percentage of GST turnover.
- Accountant's letter or declaration: A signed declaration from a registered accountant confirming the borrower's income for the relevant period.
- Bank statements: 12 to 24 months of business bank statements showing consistent income deposits. Some lenders use an averaging formula across the statement period.
- Borrower income declaration: A statutory declaration signed by the borrower declaring their income. This carries legal weight and lenders use it in conjunction with other evidence.
Some lenders accept a combination of these documents. Others have a specific hierarchy of preferred evidence. A broker familiar with low doc lending knows which documentation package will be most favourably assessed by which lender.
Rates and LVR limits
Low doc loans generally carry a rate premium over standard full-doc products, though this gap has narrowed considerably as the non-bank lending sector has matured. The premium typically ranges from 0.3% to 1.0% above equivalent full-doc rates depending on the lender and the LVR.
LVR caps are generally more conservative than standard loans. Most low doc lenders cap at 80% LVR without LMI, and some will extend to 85% with LMI applied. Borrowing above 80% on a low doc basis requires a strong overall application and a willing lender.
| Documentation type | Typical max LVR | Rate premium (approx.) |
|---|---|---|
| BAS plus accountant letter | 80% | 0.3% to 0.6% |
| Bank statements only | 75% | 0.5% to 0.9% |
| Borrower declaration only | 60% to 70% | 0.7% to 1.2% |
Which lenders offer low doc loans in Australia
The major banks have largely withdrawn from the low doc market following tighter responsible lending requirements introduced after the banking royal commission. Most low doc lending is now done through non-bank lenders and specialist lenders including Liberty Financial, Pepper Money, La Trobe Financial, and Bluestone. These lenders have built their businesses around non-conforming and specialist lending.
The product landscape changes frequently as lenders adjust their credit appetite. A broker with active relationships across the non-bank sector will have more accurate and current information about which lenders are actively approving applications than any comparison website.
The application process
The application process is broadly similar to a standard loan application with additional steps around income verification. You will need to prepare your BAS history, have your accountant prepare a declaration if required, and gather bank statements covering the required period.
Assessment timelines are comparable to standard loans for most non-bank lenders. Some specialist lenders have streamlined their processes for self-employed borrowers and can provide indicative approval quickly once documentation is received.
For NSW borrowers who are self-employed and exploring their options, working with a mortgage broker who regularly places low doc applications is significantly more effective than approaching individual lenders directly. Lend & Loan work with self-employed borrowers across NSW and understand which lenders are most active in this space.