Key Takeaways
- Low doc loans are for self employed people who can't show proof of income like pay slips or tax returns.
- Low doc loans have higher interest rates, currently (5/10/2025) between 6.6% and 10.1%, while full doc loans have rates between 6% and 10%.
- Low doc borrowers usually pay 0.08% to 1% more in interest than full doc borrowers.
- Low doc loans usually have higher fees, such as application fees, risk fees, establishment fees, and more.
- The loan-to-value ratio (LVR) is important. The lower your LVR, the more likely you are to get a lower rate.
- You can get low doc loans with either fixed or variable rates. Variable rates are more common and usually a little cheaper.
- Once you have enough proof of income, you can save money by refinancing to a full doc loan.
- If you work with a mortgage broker like Dark Horse Financial, you can compare lenders and find the best low doc home loan rates in Australia.
Many Australians might turn to a low doc loan if they don’t have the usual income documentation that banks need. These loans are a great way to buy a home or invest, but they usually have higher interest rates and fees than full doc loans. This article looks at the differences between low doc and full doc home loans, focusing on interest rates, fees, and what borrowers should know before they apply.
What Is a Low Doc Loan?
Low doc loans, which stand for “low documentation loans,” are for people who can’t show standard proof of income like pay slips or tax returns. People who are self employed, own a business, are freelancers, or are contractors often get these loans.
Instead of traditional documents, borrowers applying for a low doc loan usually provide:
- Business Activity Statements (BAS)
- An accountant’s letter (if available)
- Bank statements showing business income (required depending on the lender)
What Is a Full Doc Loan?
A full doc (full documentation) loan is the most common type of home loan. It requires borrowers to provide full income paperwork, such as:
PAYG Full Doc Loans:
- Recent payslips
- Tax returns
- Group Certificate
Self-Employed Full Doc Loans:
- Financials
- ATO Notice of Assessment
- Savings and Credit Card Statements
- Bank Statements
These loans are usually only available to PAYG (Pay As You Go) workers who have a steady income that can be verified and to self employed borrowers who have all the paperwork they need. Lenders are more sure of their borrowers’ ability to pay back the loan because the income verification is so thorough. This means they can offer lower interest rates than low doc loans.
Why Do Low Doc Loans Have Higher Interest Rates?
Lenders can’t verify income with the same certainty they can with full doc loans. This makes it harder to assess whether the borrower can consistently repay the loan. Lenders can more thoroughly check a borrower’s ability to pay back a full doc loan, which is why they charge lower interest rates.
What are the Rate Differences Between Low Doc and Full Doc Mortgages?
Full Doc Loan Interest Rates
Full doc loans currently offer more competitive interest rates. In Australia, full doc rates generally range from 6.5% to 10%, depending on the lender, loan size, credit history, and whether the loan is for owner occupied or investment purposes.
Low Doc Home Loan Rates
Low doc home loan interest rates in Australia typically range from 6.6% to 10.1%. The exact rate depends on the strength of the borrower’s alternative documentation, credit score, loan size, and LVR.
What Affects Your Interest Rate?
Several factors impact how much you’ll pay in interest, such as:
Loan-to-Value Ratio (LVR)
A lower LVR (meaning you have a larger deposit) usually results in a better interest rate. For example, borrowers with a 60% LVR will generally receive lower rates than those with an 90% LVR.
Loan Type
Interest only loans usually have higher rates than principal and interest (P&I) loans. Investment loans can also be more expensive than loans for owner occupiers.
Credit Score
A good credit score helps you access lower rates. If you’ve had defaults or missed repayments, lenders will consider you a higher risk borrower and may increase your interest rate accordingly.
Documentation Provided
Lenders price interest rates higher for low doc loans, while full doc loans are can come with lower rates.
How Can I Lower My Interest Rate on a Low Doc Home Loan?
If you’re applying for a low doc loan, there are several strategies you can use to reduce your interest rate.
Increase Your Deposit
A lower LVR (such as 60%) significantly reduces the lender’s risk. This can help you qualify for lower interest rates.
Avoid Interest-Only Loans
Principal and interest repayments often come with lower interest rates. Where possible, go for P&I to save over the life of the loan.
Refinance to Full Doc Later
Once you’ve been in business longer or have more stable income records, consider refinancing to a full doc loan. This can give you access to lower interest rates.
Speak to a Mortgage Broker
Use a mortgage broker like Dark Horse Financial to compare offers from multiple lenders who may offer competitive rates for low doc loans. A broker can help you find the best rates for your financial situation.
Is the Interest Rate Fixed or Variable on Low Doc Loans?
Low doc loans in Australia can be either fixed or variable. Variable rate loans are more common.
Variable Interest Rates
Most low doc loans come with variable interest rates. Changes in the Reserve Bank of Australia’s (RBA) cash rate or the lender’s prices can cause these rates to go up or down.
Fixed Interest Rates
Some lenders offer fixed low doc loans with terms of 1 to 5 years. Generally, fixed rates are higher than variable rates, and there are usually fewer fixed rate low doc products on the market.
Average Interest Rates for Self-Employed vs PAYG Borrowers
Low doc self-employed borrowers typically pay between 0.08% and 0.1% more in interest than PAYG borrowers.
For example:
- A PAYG borrower with a full doc application may secure a rate of 6.5%
- A self-employed borrower with a low doc application may receive a rate closer to 6.6% or higher
Final Thoughts
Low doc home loans are very important for Australians who are self-employed or don’t fit the mould of traditional borrowers. But that flexibility costs more in terms of interest rates and fees. To keep those costs down, try to make a bigger deposit to lower your LVR, and talk to a qualified mortgage broker to find the best loan for you. Once your finances are more stable, you might want to switch to a full doc loan to save even more money.
Disclaimer: Loans and their accompanying benefits are available only to those who qualify for them and have been approved. Though we put a lot of care into writing this article, the information presented within is general and doesn’t consider your unique situation. It is not meant to serve as a substitute for professional advice, and you should not rely on it solely for any major financial decisions. You should always consult with a professional when you’re dealing with finance, tax, and accounting matters.
Get The Best Rates for Your Home Loan
We at Dark Horse Financial are committed to finding the best rates for your home loan, whether you’re a full doc or low doc borrower. We’ll make sure to connect you to the right lenders and get you the best deal. Contact us today to learn more.
