A specialist loan is whereby non-conventional methods of income verification are applied to demonstrate you can afford a loan.
A specialist loan refer to loans whereby you have some sort of bad credit history which prevents you from being accepted by a mainstream bank. Specialist loans are also known as Alt Doc or Lo Doc loans, and have other unique names like ‘refresh’, ‘reset’ or ‘recharge’.
Specialist loans are typically provided by non-bank lenders outside the major financial institutions.
This is because they fill a need which is not provided by mainstream banks. It is interesting to note though that the sources of funds of specialist lenders are provided by the big four banks (CBA, Wesptac, NAB, ANZ) as well as many large multinational banks.
A specialist loan is suitable when:
Key success factors to specialist lending are to:
Accurately explain your situation to us so we can position to the bank in a way that will make sure your loan gets approved
A credit impairment can refer to:
These items can be identified on a Credit Check Report which we run for most self-employed clients, or those who indicate that they may have a bad credit history.
A specialist loan can be used the same way any normal home loan can be used. This includes:
Methods of verification can include:
An income declaration is where you self-declare your income in a formal document to the bank.
This income is then used for servicing as long as your accountant is willing to confirm this in a corresponding verification document and the rest of your application meets the lender’s policy criteria.
An accountant’s income verification is a separate document or declaration that confirms the income that you earn.
Usually this statement will match identically the income you have declared or, at a minimum, advise that you can afford the loan repayments.
The letter will also advise the number of years they have been your accountant, their professional membership and that there are no conflicts of interest in making the declaration.
The rates on a specialist loan are usually 1.0 – 3.0% higher depending on the purpose of the loan (owner occupied or investment), the Loan to Value Ratio, and the degree of credit impairment. The more risk presented to the lender, the higher the interest rate that applies.
In addition to a higher interest rate, specialist lenders will charge a higher establishment fee than a normal bank.
This fee is usually 1.0 – 1.5% of the loan amount and can be labelled as a ‘risk fee’. Some lenders will allow this fee to be capitalised (i.e. added) to the loan so that you do not need to pay the risk fee out of pocket.
Some specialist lenders will call you to test that you understand the implications of your loan application and to verify that the details are correct.
You accountant may be called to verify the same. Apart from this, the loan process is mostly the same as any other full document loan application.
No, you are not stuck with a specialist loan.
As long as can demonstrate (1) good conduct on your loan; (2) your credit file has been remediated; and (3) the income required to service the loan under standard full-doc requirements, you will be able to refinance your loan back to a mainstream lender.
Yes, 2 types of restrictions are: