Low-doc home loans explained: who they suit and what they cost
Your business is doing well, but your tax returns aren’t ready or don’t tell the full story. A low-doc home loan lets you verify income another way. Here’s how they work, who they suit, and what they really cost.
By Sam, Clio Financial
20 October 20268 min read
Key takeaways
- A low-doc loan verifies your income with BAS, business bank statements or an accountant’s declaration instead of tax returns.
- They suit established self-employed borrowers whose returns are late, or whose taxable income understates what they earn.
- Expect a larger deposit and a higher rate than a standard loan. Many lenders cap borrowing at around 80% of the property’s value.
- A low-doc loan doesn’t have to be forever. Once your returns are lodged, refinancing to a full-doc loan can cut your rate.
Low-doc home loans have been around in Australia for decades, but they’re often misunderstood. They aren’t “no-doc” loans, and they aren’t only for borrowers with poor credit. They’re simply a different way for lenders to confirm a self-employed borrower’s income.
Used well, a low-doc loan can help you buy months or even years sooner than waiting for your tax returns to catch up. Used poorly, it can cost you more than it needs to. This guide covers what you need to know.
What is a low-doc home loan?
A low-doc (or “alt-doc”) home loan is a mortgage for self-employed borrowers who can’t, or would rather not, prove their income with recent tax returns and Notices of Assessment. Instead, the lender relies on other evidence of how your business is performing.
Low-doc loans must still meet Australia’s responsible lending laws. The lender has to be satisfied you can afford the repayments, so you’ll still provide documents and the application will still be assessed carefully. It’s the type of evidence that changes, not the standard.
Who are low-doc loans for?
Low-doc loans usually suit borrowers who:
- Have an ABN and have been trading for a reasonable period, often at least 12 months and sometimes less with a specialist lender
- Haven’t lodged their latest tax returns yet, which is common for business owners who lodge through an accountant later in the year
- Earn more than their taxable income suggests, for example because of large one-off deductions or reinvestment in the business
- Have recently grown strongly, so their last lodged return understates their current income
- Have a clean credit history and a healthy deposit or equity
If your tax returns are up to date and show enough income, a full-doc self-employed loan is usually cheaper. It’s worth checking first, because many borrowers who assume they need a low-doc loan don’t.
Low-doc loan requirements: what documents will I need?
Lenders vary, but most low-doc loans use one or a combination of these income documents:
| Document | What it shows | Typical period |
|---|---|---|
| Business Activity Statements (BAS) | Business sales and GST reported to the ATO | Last 6 to 12 months |
| Business bank statements | Money actually coming into the business | Last 6 to 12 months |
| Accountant’s declaration | Your accountant confirms your expected income | Current year |
| Self-declaration of income | You declare your income and confirm you can afford the loan | Current year |
Requirements are a general guide and vary between lenders.
You’ll also usually need proof of your ABN and GST registration (lenders using BAS will expect you to be registered for GST), photo ID, statements for any existing loans, and evidence of your deposit.
How much deposit do you need?
Because the lender is relying on less formal evidence, it will usually want you to have more of your own money in the property. Many low-doc lenders cap the loan at around 80% of the property’s value, which means a deposit of at least 20% plus purchase costs. A small number of specialist lenders will go higher with lenders mortgage insurance (LMI), but the cost rises quickly.
In general, the bigger your deposit or equity, the more lenders you’ll have to choose from and the sharper the rate you’ll be offered. Already own property? The equity in it can often be used in place of a cash deposit.
Low-doc home loan rates and fees
Low-doc loans usually cost more than a standard home loan. That can include:
- A higher interest rate, often priced in tiers based on your deposit, credit history and which documents you provide
- A risk fee or higher establishment fee charged upfront by some lenders
- LMI if you borrow above 80% of the property’s value, where available
The difference between lenders can be significant. Two low-doc loans for the same borrower can be priced very differently depending on how the lender rates the risk, so comparing the whole cost, not just the headline rate, really matters.
Do the big banks offer low-doc loans?
The major banks have largely stepped away from traditional low-doc lending, but some will accept alternative income evidence in specific situations, such as an accountant’s letter or a single year of financials. Most low-doc loans today come from non-bank and specialist lenders, which often have more flexible policies and can be very competitive for the right borrower.
Non-bank lenders are regulated under the same responsible lending laws. Many are household names in the broker market even if you haven’t heard of them, and some offer features such as offset accounts and redraw.
Moving from low-doc to full-doc
Think of a low-doc loan as a bridge, not a destination. Once your tax returns are lodged and show your real income, you may be able to refinance to a full-doc loan at a lower rate. We recommend reviewing your loan each year after your returns are lodged, so you’re never paying a low-doc premium for longer than you need to.
Pros and cons at a glance
Pros
- Buy without waiting for tax returns
- Income based on how your business performs now
- Can suit growing businesses
- A path to refinance later
Cons
- Higher rates and possible risk fees
- Larger deposit usually needed
- Fewer lenders to choose from
- Stricter credit history requirements
Frequently asked questions
What is a low-doc loan?
A low-doc loan is a home loan for self-employed borrowers that verifies income with documents such as BAS, business bank statements or an accountant’s declaration instead of tax returns and Notices of Assessment.
Can I get a low-doc loan without tax returns?
Yes. That’s the main purpose of a low-doc loan. Lenders will use alternative evidence of your income, but you’ll still need to show you can afford the repayments.
How much deposit do I need for a low-doc loan?
Usually at least 20% plus purchase costs, because many low-doc lenders cap the loan at around 80% of the property’s value. Some specialist lenders go higher with LMI.
Are low-doc home loan rates higher?
Generally yes. Rates are usually higher than standard loans and are priced on your deposit, credit history and documents. A larger deposit and clean credit file can bring the rate down.
Do I need to be registered for GST?
Most low-doc lenders that use BAS require GST registration. If you’re not registered, some lenders may accept business bank statements or an accountant’s declaration instead.
Can I refinance a low-doc loan later?
Yes. Once your tax returns are lodged, you may qualify for a full-doc loan with a lower rate. Check for any exit or break costs before switching.
Sam is a Sydney mortgage broker who specialises in home loans for self-employed borrowers and business owners. He holds a Bachelor of Commerce and a Diploma in Finance and Mortgage Broking.
This article is general information only and doesn’t take into account your objectives, financial situation or needs. Lender policies change regularly. Speak to us for advice about your situation.
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