Lease doc property loans have become increasingly popular among property investors in recent years. A lease doc loan is a type of mortgage designed for borrowers who may not have the same level of documentation as traditionally employed borrowers. In this article, we will cover the basics of lease doc property loans and how they can benefit investment properties.
What is a lease doc property loan?
A lease doc property loan is a type of mortgage that allows self-employed borrowers to provide less documentation than what is required for traditional home loans. These loans are designed for borrowers who have difficulty providing the same level of documentation as traditionally employed borrowers, such as payslips and tax returns.
Instead, borrowers can provide an existing lease agreement to verify the income on the Commercial property. The lender will assess the income based on the rent received from the property, rather than the borrower’s personal income.
Benefits of lease doc property loans for investment properties
Lease doc property loans can provide several benefits for property investors, including:
1. Less documentation required:
As mentioned earlier, lease doc loans require less documentation than traditional home loans. This can be particularly beneficial for self-employed borrowers who may not have all the necessary documentation or who find it challenging to provide traditional proof of income.
2. Higher borrowing capacity:
Because lease doc loans are assessed based on the rental income of the investment property, rather than the borrower’s personal income, borrowers may be able to borrow more money than they would with a traditional home loan. This can be particularly useful for property investors who are looking to purchase multiple investment properties.
3. Flexibility:
Lease doc loans can offer more flexibility than traditional home loans. For example, some lenders may allow borrowers to make interest-only repayments or make additional repayments without a penalty. This can be particularly beneficial for property investors who are looking to manage their cash flow or who want to pay off their loan faster.
4. Lower interest rates:
Lease doc loans may offer lower interest rates than low doc commercial property loans. This is because the lender is taking on less risk by assessing the borrower’s income based on the rental income of the investment property. This can help property investors save money on interest over the life of the loan.
5. Faster approval:
Lease doc loans may be approved faster than traditional commercial property loans. Because there is less documentation required, the lender may be able to assess the loan application more quickly. This can be particularly beneficial for property investors who need to act fast to secure a property.
Things to consider before applying for a lease doc property loan
While lease doc loans can provide several benefits for property investors, there are some things to consider before applying for this type of loan. These include:
1. Higher interest rates:
While lease doc loans may offer lower interest rates than low doc commercial property loans, they may still have higher interest rates than other types of loans. This is because they are considered to be riskier than traditional commercial property loans.
2. Limited options:
Not all lenders offer lease doc loans, and those that do may have different criteria for approval. This can make it more challenging to find a lender that can meet your needs.
3. Increased risk:
Because lease doc loans are based on the rental income of the investment property, there is a higher risk that the borrower may not be able to meet their loan repayments if the property is vacant or if the rent decreases.
4. Larger deposits:
Depending on the interest rate and rental return this could mean a deposit of 40-60% plus costs is required which many investors will have to borrow from eq
In summary, lease doc property loans can be a useful tool for property investors who are self-employed or who have difficulty providing traditional proof of income. These loans offer several benefits, including higher borrowing capacity, lower interest rates, and more flexibility. However, it’s essential to consider the potential risks before applying for a lease doc loan. If you’re considering a lease doc loan, speak to a mortgage broker (like me!) to discuss your options and ensure that it’s the right choice for your individual circumstances. As with any loan, it’s important to do your research and compare different lenders to find the best deal for you. While lease doc loans can offer advantages, they may not be suitable for everyone, and it’s crucial to weigh up the pros and cons carefully. With the right approach, lease doc property loans can be an excellent option for property investors looking to expand their portfolio or invest in new opportunities.
I hope you found these basic tips informative and useful. I wish you all the best on your investment journey and encourage you to book a free call with me here if you require further guidance and support in navigating these types of loans.
