The Australian property market is one of the most sophisticated in the world. Subsequently, the mortgage market is also highly sophisticated. The Australian finance market was deregulated a few decades ago, although it is still tightly controlled by the national government.

Deregulation has allowed a number of new lenders to move in to the Australian property lending market. This has in turn resulted in a wide variety of products available from many different lenders. Products are available for almost all types of borrowers and offer a wide selection of flexible options.

This series of articles explores the Australian mortgage market and offers information on many of the different products that are available today.

Standard Home Loans

Although there is no definition of a “standard” mortgage product, it could be said that a product with a variable interest rate and no flexible features could fit the name. Products considered “standard” would be something like a traditional mortgage issued by a big bank from many year ago.

A standard home loan product would only be available to borrowers with perfect credit files and who have a safe, secure job with a consistent salary. This product would require a substantial deposit to be funded by the borrower and the balance of the loan would likely not exceed about two to three times the joint annual salary of the borrowers.

Needless to say, this type of product is rare these days. Home loans typically have at least one variable that is non-standard because people live completely different lifestyles to those that existed several decades ago.

Low Doc Home Loans

Probably the most non-standard product available is the low doc home loan. This type of mortgage does not require the applicant to prove their income by way of wage slips. Why? Because applicants who apply for a low doc home loan are more than likely self-employed and therefore do not have wage slips.

This product was invented to cater for self-employed workers who make a good living but cannot prove their income in the same way as salary earners. Lenders have recognised that many self-employed workers are able to pay off home loans just as good as their employed counterparts.

Instead of salary or wage slips, applicants declare their earnings on a legal document and submit it with their application. It is important to be truthful when declaring your income in this way as it is illegal to lie on a loan application form.

The lender will assess the application in the normal way and will approve the mortgage if they believe the self-employed worker has the ability to pay back the loan. Low doc loans usually require a larger deposit than standard mortgage products, so evidence of being able to fund the deposit will form part of the application.

Some low doc loans offer flexible options such as lines of credit and offset accounts, just as standard products do. It is important to note, however, that not all low doc home loans offer the same flexible benefits as others. Interest rates are also generally higher on low doc loans than standard loans, to provide for the extra risk to the lender.

Author Bio: Read the latest Mortgage News and stay in touch with the home loan market at http://www.moneynet.net.au/. http://www.moneynet.net.au/

Category: Finances
Keywords: mortgage news, home loan news