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On the 1st of December Genworth, one of Australia’s largest mortgage insurers, made some significant adjustments to their Low Doc policies. These changes have made it much more difficult for borrowers requiring Low Docs to be approved for finance. As most major banks and lenders use Genworth to insure their Low Doc loans the ramifications of these changes are huge.
The three main changes are as follows: Acceptable loan purposeGenworth will no longer allow a borrower to refinance and borrow a cash out component through their mortgage. This means you can’t access your equity with a low doc loan and you can’t consolidate other debts. You can only refinance the value of your mortgage. They will also no longer allow an investment loan to be refinanced. You can only refinance non-investment mortgages. Genworth will allow funds to be used to purchase an existing residential dwelling, construct a single or duplex residential dwelling, purchase vacant land and off the plan purchases. New lending criteriaApplicants must have an ABN that has been registered for a minimum of 24 month and they must be GST registered for a minimum of 12 months. Additional supporting documentationPreviously with a Low Doc loan you would sign a declaration stating that you could afford the repayments of the loan and in some instances your income would be stated on the declaration. Genworth are now asking for confirmation of your income by providing 6 months of your trading bank statements and 12 months of Business Activity Statements lodged with the ATO. These policy changes are for Low Doc loans insured by Genworth. Mortgage Insurance is applicable on Low Docs with most lenders when you are looking to borrow greater than 60% of the value of your property. If you are borrowing less than 60% of the value of your property these changes may not be applicable. There are still some lenders that can provide Low Docs to 80% that don’t use Genworth as a mortgage insurer. St George self insure their loans and for the moment are still offering competitive Low Doc products. For any more information regarding these Low Doc changes don’t hesitate to contact us. |
