How To Refinance A Low Doc Loan For A Home Loan
You Can Still Refinance!
Are you trapped in an older, high rate home loan? Have you tried refinancing? You’ve probably found that many lenders are no longer willing to approve a low doc loan used in refinancing existing home loans. This is frustrating, and leaves you out in the cold when you really need money.
Luckily, you can still find lenders who can approve low document refinance loans. This article will help you figure out where to find them, and show you what you need and what you need to do in order to get them.
The Rules of Refinancing Using Low Doc Loans
Credit criteria will vary from lender to lender, but you should be able to refinance your loan if these rules apply to you:
- You’re borrowing no more than 80% of the property value.
- You have a clear credit history.
- All of your payments over the past six months have been on time, every time.
- If you’re borrowing more than 60% of your property value, you will need an ABN.
- They will accept almost all reasons for borrowing – business, personal and investments.
Just How Much Can Be Borrowed When Refinancing?
Depending upon the amount of your property value you are trying to borrow, you will need different documents. This is know as the LVR. Here’s what you’ll need for different levels of borrowing:
- There are no BAS statements required for an amount up to 60%.
- If you go to 75% of your value and using a major lender than no BAS statements will be required.
- For borrowing higher, up to 80% of your property value that you’ll have to show BAS, OR an accountants letter to back up the income that you claim.
- The maximum that you can borrow at 80% LVR will be $1,000,000. And there is no max amount at 60%.
Lending policies are complex and there are quite a few other factors that come into play. Those factors are your GST registration, credit, what industry you work in and where and how big your security property is can all play a part. The type of loan might also be considered when making a decision. You might want to take the step of inquiring online so that the lender can sort your situation in detail.
Is It Possible to Consolidate My Debts When Refinancing?
It’s definitely possible to borrow extra money when you refinance a low doc loan to pay off other debts or for any other purpose. It’s a great idea to roll credit card debt with a high interest rates and your personal loans into a lower APR home loan in order to pay them off.
When you’re consolidating your debts with a refinance loan, your lender will want to see current loan statements to be sure that you have paid your payments in a timely manner. If not, they may be able to help you find other options that can assist you.
How Can I Use The Money?
Many lenders won’t put any limits on what you can use your refinance home loan money for. One might invest in shares of property with an investment type loan or even get a new home using your equity in your current home. Other options include renovations or knocking down and rebuilding your home.
You will find that many lenders will have restrictions on an equity release, or what are referred to as “cash outs”. This is money that is released to the buyer with little evidence as to how the money is used.
Construction Loans and Low Doc Refinancing
Because of certain policy changes, you may find it difficult to finance new construction on a piece of land that you already own. The irony kicks in when you find that if you are buying and building on the land at the same time, it’s very easy to procure a low doc loan. If you already own the land and there’s a loan on it, lenders who will consider your loan are very rare indeed.
There’s a simple reason for this abnormality: The institutions that accept refinance loans don’t approve construction loans. The ones who will do both tend to have problems with their credit scoring or they will require statements. Some lenders will still consider the loan, but will require BAS statements or an accountant’s letter.
Can You Get a Low Doc Rapid Refinance Loan?
Rapid refinance loans, also know as a Priority Refinance XRO, Quick Refinance, Fast Refinance or Express Refinance is when your lender advances your new low doc loan before they have received the title documents as security. This can be done due to the use of title insurance, which is used to protect their interest in the event that something goes awry and the loan in unsecured.
The process varies between lenders, but most let you to use this option with a low doc refinance and you can receive your money faster.
What, If Any, Are The Equity Requirements?
In most cases, you can borrow more than 80% of the value of your property when refinancing with a low doc loan. In the event that you’re borrowing between 60% and up to 80%, they may ask that you pay what is called an LMI premium. A few will allow you to borrow more than 80% of your value, but the interest rates will typically run between 3% and 4% higher than those at or below 80% LVR.
Besides this, most banks will also have a policy of “no negative equity”. This means if your assets total less than your liabilities, you loan will be outright declined.
What are Interest Rates For a Low Document Loans?
You will need to talk to a lender to find out exactly what the rate will be. In many cases, you can get a rate that’s actually lower than the BSVR (Bank Standard Variable Rate). You should also keep the cost of LMI in mind, setup as well as any exit fees that may be charged by your lenders.
Make Sure To Check Your Current Rate
In over the past few years, interest rates have declined significantly, so if you got your loan more than two year ago, you should definitely check and see if your interest rate is still a good rate. The bank, obviously, isn’t going to call you and say “Hey, we just noticed you have an astronomically high interest rate. We can offer you a new rate that will drop your interest about X%, are you interested?” Why? Because it’s not good business. They’d lose money that way, and that’s not what they’re after. It’s all on you to keep up with these things, and see if you can get a better deal by refinancing your home loan.
Refinancing your loan might be in your best interest, or it may not be right for you at this point in time. You need to look at what is available, maybe talk to a financial advisor and do your homework. If it turns out that refinancing would benefit you, then you should definitely shop around before you make a decision. In the mean time, do everything you can to keep your credit in good shape. Just because you’re hoping to ditch your current lender in a month or two doesn’t give you license to not pay the mortgage for month or so.
Related posts:
- Refinance your Home Loan or Switch to Bankwest
- Refinance Bad Credit Home Loan – What You Need To Know About Refinancing Non Conforming Loans
- Cash Out Refinance
- Refinance Your Home Loan and Consolidate Debts
- Fox Symes Mortgage Refinance
- Refinance Real Estate Loan
- How to Refinance an Existing Mortgage with HSBC
- Refinance Options
- Home Loan Refinance Rates
- How To Refinance Your Home Loan
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