Commercial No Doc Loan
Despite the financial crisis of 2008 Commercial No Doc Loans are still available throughout Australia with a handful of lenders. As commercial property loans are not covered under the National Consumer Credit Protection Act (NCCP), having the ability to get your loan approved using a No Doc lending policy secured by commercial property is a niche field.
What types of property can be used for a Commercial No Doc Loan?
Commercial No Doc Loans can be secured using multiple property securities. These include
- Commercial property,
- Industrial property,
- Retail property
- Residential property
With many respects, in commercial lending practices, lending on commercial property is the same as lending on industrial property with lenders taking an almost identical view on either types of property securities. Hence many lenders consider commercial property and industrial property the same types of properties despite the category and zoning/s.
What is the maximum LVR you can borrow with a No Doc Commercial Loan?
The maximum LVR permitted for a No Doc Commercial loan is 65%.
If I have bad credit, can I get a Commercial No Doc Loan?
With a borrower having bad credit, it is possible to still get a commercial No Doc Loan. A borrower with bad credit looking for a Commercial No Doc Loan will more than likely pay a higher interest rate because of the combination risk of having bad credit coupled with borrowing using No Doc policy.
The lack of lenders making money available for this type of borrower adds to the cost of this loan as there is little competition amongst lenders for this type of borrower.
What is the difference between a Commercial No Doc Loan from a Commercial Low Doc Loan?
A No Doc Commercial Loan does not require any income stated on the affordability declaration when taking out the loan. Therefore a respective borrower states that he can afford the loan ONLY without any need to give any detail of proposed income or expenses he or she has. In many respects, this loan is considered an asset lend.
With a Commercial Low Doc Loan, a borrower usually declares an income that he/she is earning. This income is then used in a serviceability/affordability analysis. Some lenders also request additional supporting pieces of information like business trading accounts or business activity statements to help verify the turn over and the income being declared by the borrower. In addition, some Low Doc Commercial Loan lenders require an additional accountant’s letter to verify the stated income.
Is a No Doc Commercial Loan more flexible?
No Doc Commercial Loans secured by either commercial or industrial property are more flexible than standard Full Doc Loans. One of the main reasons for this argument is the lender does not conduct any financial annual reviews of the loan or the applicant after the loan settles as no financial information was originally supplied or is being called for. Hence the loan is termed a ‘set and forget’ and the borrower does not need to continuously show his financials for annual review. Any person who has experienced this will be able to confirm that this is an intrusive hassle by lenders as they keep an almost inside view of a borrowers business. Hence if you go through a slow year, or have not produced your financials for whatever reason, then a lender can exit you from your existing loan, increase your interest rate or charge additional fees which can get extremely expensive and lead to frustration.
Further, Commercial No Doc Loans generally do not have an annual roll over period allowing a borrower to remain in his current loan for a longer period of time.
What is the maximum loan term for a No Doc Commercial Loan?
The maximum loan term for a No Doc Commercial Loan is dependent on the lender. Some lenders offer loan terms for 1 or 3 years, and there is a small number which offer this up to 25 years.
When looking at the 25 year term, consider the fact that this is a loan for 25 years with no annual reviews or roll over’s. Further, with the 25 year loan, you can get up to 7 years interest only with then 18 years principle and interest. Best of all, for the right applicant, we can get the interest only terms extended to allow for longer interest only terms. These 25 year loans should be viewed as ‘set and forget’ loans with no need to rework or review after they have settled.
Are No Doc Commercial Mortgages more expensive?
No Doc Commercial Mortgages are slightly more expensive than full doc loans. This is because of the inherit risk of lending to a borrower without considering the financial position of the borrower. Hence, the few lenders who offer No Doc Commercial Property Mortgages price the loan approximately 1% higher than a normal Full Doc Loan. No Doc Commercial Loans are approximately 0.25 – 0.6% higher than Low Doc Commercial Loans. In the big scheme of things, this is quite cheap considering you are not providing any documentary evidence of your income or expenses compared to other types of loans.
Do any banks offer No Doc Commercial Mortgages?
There are no banks in Australia that offer No Doc Commercial Mortgages. The only lenders who offer these types of loans are specialized finance companies or non bank lenders. It is worth mentioning that the main lenders who lend using No Doc Commercial Mortgage policy receive their funds from large institutional banks under strict business arrangements. Hence a well informed broker can be able to tell you that some if not all the money being lent by a specific lender is being sourced from which particular bank or financial institution.
At Mortgage Providers, we have access to a variety of Commercial No Doc Loan lenders. Best of all, we can set these types of loans for clients who do not want to have their financials viewed by lenders and carry on the need to operate their businesses without hassles. Further we can get these loans priced very close to almost Full Doc Loan rates for loan terms of up to 25 years without any issues!