Case Study: Factors to Consider When
Choosing a Lo Doc Loan

Using the wrong lender for your Lo Doc loan

The following example explains the use of Lo Doc loans and some of the factors you need to consider.

Picture this: You've spoken with your local Commonwealth Bank loans officer and he's keen as mustard for you to do a Lo Doc loan with him.

So you go ahead and organise a pre-approval, it comes back worded "loan approved pending property valuation and mortgage insurance" - fairly standard conditions.

You've spoken with a number of agents around the country looking for a cash flow positive property. Finally an agent in Broken Hill comes back to you with a deal that you have been looking for…

The owner wants to stay on as a tenant.
It's netting over 10% yield etc.

Everything seems to be working out fine…or is it?

Broken Hill's postcode is 2880. If you look at the Genworth website you'll see that they won't insure Lo Docs there. And since CBA use Genworth as their Mortgage Insurer, it's highly unlikely that your loan application with the CBA will be approved.

However if you had gone to the ANZ, it would have been a different story. ANZ use PMI, who will insure up to 65% and $300,000 in that postcode. So there's a better chance that ANZ would have approved your loan.

Admittedly this case study is simulated, but it highlights the importance of knowing your insurer and who your funder uses for Lenders' Mortgage Insurance.

This is why we sometimes ask you to supply us with a copy of your credit file because it shows your previous insurers.

So that's just one thing of which you need to be aware. Other factors to consider include:

• The size of the property
• The buying identity (e.g. trust and type of trust)
• The type of property (e.g. is it a high rise apartment or a dual occupancy)
• ABN (do you have one and for how long?)
• Are you registered for GST?
• Do you have any other loans insured by that insurer?

There are so many things to consider when doing a Lo Doc loan that it makes sense to seek the help of a professional. Contact us today to discuss your investment property financing needs.