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Low Doc No BAS |
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| Date Added: June 17, 2011 05:26:06 AM | |
| Author: Che Beguas | |
| Category: Business & Economy: Finance and Investment: Loans | |
re Global Financial Crisis, the land of the low doc was king. Lending policy would even enable low doc up to 90% LVR! No BAS was ever required and there was even No Doc, which primarily was only a stated income and a signature. Life was cruisy! Fast forward to 2011 and it’s a completely different story! Lending restrictions have tightened, No deposit home loans are scarce, No Doc loans are non-existent and Low Doc policy has also tightened with many lenders now requiring 6 months BAS (trading statements) to confirm the income stated. Much of the tightening on policy was not only from the lenders themselves, but from the new credit act which came into effect and rose from the GFC and the collapse of many financial institutions all over the world. The new credit act (called NCCP) has made the lenders more responsible for verification of income, hence the tightening of policy. With policy tightening, lenders still wanting to offer a low doc loan began to also ask for BAS to verify at least the last 6 months trading so to be seen as being a responsible lender. The income or turnover is matched against income stated on the self certification form and no more than 40% of annual turnover can be used as income. Gone were the days of the past when all it took was an income amount and a signature! The lender which I use, is one of the few main stream lenders which did not alter their policy to asking for BAS right away. Sure, if there are exceptions to the application such as poor repayment history or only just registering for GST prior to application being submitted, then BAS may be asked for… However BAS is not required if all usual criteria is met. Providing BAS can be a hassle for may self employed applicants, as some accountants prepare these only once a year. An applicant also may have just had a poor 2 trading quarters which would then be detrimental to the application if they have to be shown to the lender. Low Doc No BAS unfortunately does not take us back to pre-GFC with only an income and a signature, there are still a couple of requirements. One being an ABN being held for 12 months for 60% max lend and ABN held for 24 months for 80% max lend. Along with ABN, an accountant also has to confirm: - the income stated is correct - the length of association with applicant - nature of applicant’s business - cash out use if over a certain limit Still, it is a lot easier and less-hassle than providing 2 years worth of tax returns and financial statements for a full doc loan. And the great thing is, the interest rate is very comparable to a full doc loan! Diving further into Low Doc No BAS policy, lenders have also added a risk fee post GFC. With LVR 60% or under there is no risk fee payable, however between 60% and 80% there is a risk fee which can be added onto the loan amount so is not an out-of-pocket expense. Upon looking at other lender’s policies for those offering Low Doc without BAS, it seems they charge a much higher initial fee than my lender, and also cannot compete on the rate. I believe my lender (which is not a non-conforming lender) has one of the best low doc policies going around and is certainly one of the few who will still consider Low Doc No BAS. For further information please contact me at craig@mortgageguru.com.au |
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