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Posted: 3/9/07 By Elliot
With all the latest press about Lo & No Doc loans of resent many doubts have been planted in to our minds. Approx. 50 mortgages per week are defaulted in Australia and majority being Lo & No Doc loans. Why is this occuring?

Have lenders become to loose on their assessments?
In this article we explore Lo & No Docs and the Pros & Cons.
What is a Lo & No Doc loan?
A Lo & No Doc loan is simply just that, a loan with low or No documentation supporting your financial position. In many cases individuals can register an ABN today and get a Lo Doc loan tomorrow. This risk with this product are simply the lender needs to hold a statutory declaration as a means of supporting the clients honesty toward their financial position. The problem not so much being people embellishing their finanial position but more so are just unaware of their financial health. The main benefit to the customer is a chance now not to reveal their personal finances and to achieve lending efficently without too many questions asked.
However it is not so much the income you make but more so the difference in income to expenses being the issue with expressing your finances.
A Lo & No Doc essentially revolves around a promise however sometimes this isn't enough to hold validity to a mortgage.

Essentially it has been indicated that professionals are in fact applying and defaulting largely on these Lo & No Doc loans eg. Doctors, Lawyers and other professional based business owners are suffering daily with large liability based expenses. Income not being the issue once again with large salaries however liabilities and expenses are well beyond income received. Those who are aware of the criteria of Lo & No Doc loans know that most lenders will not exceed the standard 80% LVR therefore the client must produce a savings cash deposit to make the difference. For these individuals the Lo & No Doc loans work well, they may be self-emplyoed and are saving regularly. They may have no large assets howver their liabilities are also minimal. With individuals using equity and other assets to achieve their deposit is where the issue lies. A lot of professionals may have expensive vehicles, and perhaps an investment property, large credit card debt etc, however thsi debts are usually outrageous, their lifestyles are over endulged and the habit hard to break.

In conclusion we suggest seeking proper financial advise from an accredited account or advisor before considering a Lo & No Doc loan.