Commercial No Doc Loans

An applicant with bad credit may be eligible for a commercial no doc loan. Borrowers must be aware that these loans attract a higher interest rate due to the combined risk of having bad credit AND borrowing with a ‘No Doc’ policy. There aren’t many lenders that offer bad credit commercial no doc loans, so there is little competition in the market - hence the cost of this loan in often inflated.

A commercial no doc loan does not require any income to be stated on the affordability declaration form. Therefore, a prospective borrower need only state that they can afford the loan - without any need to give specific details of income or expenses that 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 they are 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 turnover 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.

That's, correct! 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 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 borrower’s 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.

A Commercial No Doc Loan is best sought using a Commercial Private Loan. A Mortgage Providers broker can best assist here.

The maximum loan term for a commercial no doc 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 overs. 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.

Commercial no doc 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.

There are no banks in Australia that offer no doc commercial mortgages. The only lenders who offer these types of loans are specialised 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 tell you that some, if not all, of the money being lent by a specific lender is being sourced from a particular bank or financial institution.