Low Doc Mortgages for Self-Employed: A Guide to Home Financing

For self-employed individuals, securing a mortgage can often be more challenging than it is for traditional employees. Many lenders require extensive documentation to verify income, which can be difficult for business owners, freelancers, and contractors who may not have standard pay slips. Low doc mortgages offer a solution by allowing self-employed borrowers to secure home loans with alternative income verification methods. As a business advisor, I often recommend exploring low doc mortgage options to help self-employed individuals achieve homeownership. In this article, we’ll explore how low doc mortgages work, their benefits, and how to qualify.

What Is a Low Doc Mortgage?

A low doc (low documentation) mortgage is a type of home loan designed for self-employed individuals who may not have traditional financial records, such as payslips or tax returns, to verify their income. Instead, these loans rely on alternative documentation, such as business bank statements, accountant declarations, and BAS (Business Activity Statements), to assess a borrower’s ability to repay the loan.

Who Can Benefit from a Low Doc Mortgage?

Low doc mortgages are ideal for:

  • Self-employed individuals with fluctuating or variable income.
  • Freelancers and contractors who may not receive regular paychecks.
  • Small business owners who reinvest earnings into their business and have lower taxable income.
  • Investors with complex financial structures who prefer not to provide extensive documentation.

For these borrowers, a low doc mortgage provides flexibility while still allowing them to access home loan financing.

Key Features of Low Doc Mortgages

  1. Alternative Income Verification – Instead of traditional payslips, lenders accept alternative documents like business bank statements, accountant declarations, or BAS.
  2. Higher Deposit Requirements – Many lenders require a larger deposit, typically around 20% to 30%, to offset the perceived risk.
  3. Higher Interest Rates – Low doc loans may come with slightly higher interest rates than standard home loans due to the reduced level of income verification.
  4. Flexible Loan Terms – Borrowers can choose between variable, fixed, or split loan options.
  5. Additional Fees and Lender’s Mortgage Insurance (LMI) – Depending on the lender and deposit size, borrowers may need to pay higher fees or LMI if their deposit is below 20%.

How to Qualify for a Low Doc Mortgage

To improve your chances of approval for a low doc mortgage, follow these key steps:

1. Prepare Alternative Income Documentation

Lenders require proof of income, even for low doc loans. Commonly accepted documents include:

  • Business bank statements (typically covering 6–12 months).
  • BAS statements (Business Activity Statements) from the ATO.
  • Accountant’s letter verifying your income and business earnings.
  • Profit and loss statements prepared by an accountant.

Providing multiple forms of income verification strengthens your mortgage application.

2. Save for a Higher Deposit

Since low doc loans carry higher risks for lenders, having a deposit of at least 20%—or even 30%—increases approval chances and reduces the need for Lender’s Mortgage Insurance (LMI).

3. Maintain a Strong Credit History

Lenders assess your creditworthiness, so ensure your credit score is healthy by:

  • Paying off debts on time.
  • Avoiding late payments on loans or credit cards.
  • Reducing outstanding debt before applying.

A good credit history can help secure better loan terms and lower interest rates.

4. Demonstrate Business Stability

Most lenders prefer self-employed applicants with at least two years of business operation. If you’ve been running your business for a shorter period, consider working with a mortgage broker to find lenders with more flexible requirements.

5. Engage a Mortgage Broker Specialising in Low Doc Loans

A mortgage broker experienced in low doc loans can help you:

  • Identify lenders with favourable terms for self-employed borrowers.
  • Navigate the application process and ensure all documentation is in order.
  • Secure the most competitive interest rates and loan features.

Pros and Cons of Low Doc Mortgages

✅ Pros:

  • Provides access to home financing for self-employed individuals.
  • Flexible income verification methods.
  • Various loan options available (fixed, variable, split).
  • Can help business owners achieve homeownership without waiting for multiple years of tax returns.

❌ Cons:

  • Higher interest rates compared to traditional loans.
  • Larger deposit requirements (usually 20% or more).
  • Limited lender options compared to standard mortgages.
  • May require Lender’s Mortgage Insurance (LMI) if the deposit is below 20%.

Final Thoughts

Low doc mortgages offer a practical solution for self-employed individuals seeking home financing without extensive income documentation. By preparing alternative income verification, maintaining a strong credit profile, and working with an experienced mortgage broker, self-employed borrowers can secure a competitive home loan. As a business advisor, I encourage self-employed professionals to explore low doc mortgage options to achieve their homeownership goals while maintaining financial flexibility.

The Team at The Accountants and The Finance Brokers are here to help you navigate your cash flow requirements in your business. We offer complimentary cash flow reviews and assist you in understanding your finance needs.