Saturday, December 11, 2004

Non Conforming Loan - Australia

What is a Non Conforming loan?

A Non Conforming Loan is designed for borrowers who do not fit the profile of the standard Australian borrower. Typically each loan is tailored to the borrowers individual circumstances.

Most non conforming borrowers belong to one of the following categories -

  • Self Employed

  • Variable Income

  • Credit Impaired

  • Low Deposit

  • Mature Age Borrowers

  • New Australian Residents

  • Australians living overseas

  • Security impaired

Most lenders do not cater for people in these categories because they are considered higher risk. As a result specialist lenders have sprung up to service this area. Because the lending risks are considered to be higher than normal, interest rates are also higher than normal and vary according to the perceived risk.

Once a borrower has demonstrated they can reliably service the loan over several years and they have established a good credit record, they may be eligible for a loan at standard interest rates."

Low Doc Home Loan Features

Low Doc Home Loan: "Features of Low Doc Loans

The Low Doc loan is usually just a standard fixed or variable rate loan, but with different credit criteria i.e. low documentation.

Since full documentation is not required the risk to the lender is higher and this is reflected in the interest rate and maximum loan-to-valuation ratio (LVR) of 65 - 80%. Interest rates are often 0.5% to 1% higher than standard loans depending on risk but competition in Australia is bringing rates down and the rate is often reduced once you have established a good track record of repayments. Lenders Mortgage Insurance is not normally required on loans under 80% LVR.

Other useful features can include offset accounts, redraw facility, direct salary crediting, portability and repayment options depending on the lender and type of loan."

Low Doc Home Loan in Australia

What is a Low Doc Home Loan?>

Low Doc (short for Low Document) home loans are a recent innovation in Australia and are targeted at contractors and the self-employed, who often lack current tax and financial records. Traditionally it has been more difficult for the self employed to obtain loans because banks had a preference for borrowers on guaranteed (ie PAYE) incomes.

The Low Doc Home Loan helps Australian borrowers with irregular cash flow or who may not have current financial statements, providing they have sufficient equity in an existing property or other assets."