If you are a small business owner or a self employed citizen that is looking to own their own home, then there can be roadblocks that emerge through the usual channels. Not only do you need to provide all of your own documentation without the help of a recognised brand authority, but you are left to insure and explain your own circumstances without the backing of an employer.
This is where a low doc mortgage is offered by banks who cater the payment structure according to more modest means where taxes, rates and stipulations are scaled.
The main issue for many of these individuals in the market is the basic concern of whether or not they will actually qualify for a low doc mortgage. In order to try and offset that stress, it is worthwhile examining some key pointers that will help you reach your ambitions, targets and long-term objectives in a rational and clear manner.
Purpose of the Mortgage
The entire concept of a low doc mortgage is to offer you the same privileges as others for accessing a home loan, but to do so in a more flexible fashion that does not discriminate due to your profession or work profile. So if you believe that you are in a situation where your annual income is likely to fluctuate as you establish a new business off your own accord, then this is a road you should be exploring.
Before a decision is made, seek council on this matter with trusted sources, friends, family members, lenders and others who can outline why this form of mortgage is suitable for your circumstances.
Type of Mortgage
The low doc mortgage happens to come via a myriad of different formats. From the full-doc loan where a significant deposit is necessary on top of a clean credit history and a degree of equity, to a loan to value ratio (LVR) where the rate is scaled on a percentage basis, there are processes that must be taken into account.
The formats do not stop there. When consulting with your lender or loan specialist, think of an owner-occupied home loan, interest only, a fixed rate or a construction home loan. There will be alternatives that should be able to suit the niche you are operating in.
Interest Rate
Comparing and analysing the interest rate is arguably the most fundamental aspect of examining the low doc mortgage market. There are fixed terms that should be offered and usually rank anywhere between 5-6%. Then there are others that are variable where the rate can rise or drop depending on external circumstances. Discuss this facet with a trained and educated professional.
Additional Terms and Conditions
It is vital before settling on a low doc mortgage that you carefully read and look over the terms and conditions that might be included. Not all of these are necessarily negative as certain items might be allowed to be offset or repayments could be downgraded if installments are met inside a particular period. There are also toggle features and redrawing that gives the owner more flexibility with their agreement.
It is when a low doc mortgage pertains to additional repayments or relocation clauses that the contract must be understood with clarity.
Summary
No two sets of circumstances are ever the same. In this respect it is wise to look at the low doc mortgage as a plan that can give you a home without carrying a significant financial burden. Yet you should consider all of the elements at play before settling on a low doc mortgage that allows you to run an enterprise as well as strike a quality work-life balance.