Costs and Features

Whereas once low doc home loans had few features and considerably higher interest rates than standard home loans, these products have moved much closer to standard loans in recent times. You should however, have realistic expectations; in many cases the interest rate will be higher than standard rates. This reflects the fact that lenders take on a greater risk with this kind of loan. They must therefore be compensated for taking on this higher level of risk, and this is reflected in the interest rates payable.

The application/establishment costs many low doc home loan products are generally comparable with standard home loans.

Although the application/establishment costs of many of the products which our low doc lenders offer are comparable with other products, you may be required to pay Lenders' Mortgage Insurance (LMI). This can be a considerable expense. Generally, when you borrow more than 80% of the value of a property, lenders will require you to pay Lenders' Mortgage Insurance. In these cases, the lender is taking on a greater risk on a given property, and the taking out of an insurance policy protects them against this risk.

You should be aware though, that whilst this insurance protects the lenders, it is in fact you, the borrower, who needs to pay for this. With low doc home loans, this Lenders' Mortgage Insurance often kicks in at a lower rate (sometimes even as low as 60%). This can add considerably to the cost of a low doc home loan, although this is a one-off expense, and not a yearly or continuing cost. Your Capital West mortgage broker will be able to answer any questions you may have with regards to Lenders Mortgage Insurance on low doc home loans.

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