You’ll generally need 20% of the property value saved as a deposit to qualify for a low doc home loan. While some more traditional home loan options need only a deposit as low as 5%, the heightened risk associated with low doc home loans means lenders require a larger deposit to offset some of the risk they’re taking on.
In Australia, the terms ‘alt doc’ and ‘low doc’ are generally used interchangeably when it comes to home loans. Some lenders may offer a distinctive home loan product that they label an alt doc home loan, but the two terms usually refer to the same type of loan – that is, a home loan that requires little documentation.
Yes, you may be able to initially take out a low doc home loan and then refinance to a full doc loan later on, either with the same lender or a new one. After a year or two of making consistent, on-time home loan repayments, you will likely have proved to your lender that you’re a trustworthy borrower, and as a result you may be more likely to receive approval for a standard, lower-rate home loan with a friendlier interest rate and lower fees, depending on the market at the time.
As low doc home loans tend to come with higher interest rates, it can be worth shopping around for more competitive, full doc loans after a couple of years to see if you can reduce your repayments. You can also speak to your lender about whether you might qualify for any of their full doc home loan products.
Low doc home loans are primarily aimed at prospective owner-occupiers, but some lenders offer low doc investment home loans. This will depend on the lender you’re working with and the range of low doc home loans they offer.
Despite their higher-risk, higher-interest nature, some low doc home loans may come with a range of optional features, including an offset account, redraw facility or the ability to make extra repayments.
However, this will vary by lender and by product, so be sure to ask before applying if you’re looking for a low doc home loan that comes with some or all of those features.
1 Australian Securities & Investments Commission. Review of ‘low doc’ home lending following the introduction of the responsible lending obligations. Accessed January 2023.