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Local Knowledge Finance

Can I refinance from a low-doc loan to a full-doc loan?

Short answer

Often, once you have lodged tax returns and financial statements that support the loan. A full-doc lender will assess you like any new applicant, including your income, expenses, credit file and the property. If your lodged income is lower than you declared for the low-doc loan, the switch may not be possible yet.

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This answer is awaiting review by James Chee CPA. Written by Local Knowledge Finance editorial team. Check the dated sources below and talk to a broker about your own situation.

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What lenders will want to see

  • A new lender must make reasonable inquiries and verify your financial situation before lending. [ASIC]
  • A broker must act in your best interests and give you a credit guide. [Moneysmart (ASIC)]
  • Each credit application is recorded on your credit report. [Moneysmart (ASIC)]

Who this may suit

  • Borrowers with lodged returns that clearly support the current loan
  • Borrowers with a clean repayment history on the low-doc loan

Who it may not suit

  • Borrowers whose lodged income does not yet support the loan
  • Anyone whose switching costs would outweigh the benefit

Your options, including not borrowing

  • Stay on the low-doc loan for now. Not switching is a valid choice.
  • Ask your current lender whether it will review your loan or move you to a full-doc product.
  • Refinance to a full-doc lender once your returns support it.
  • Wait for another year of lodged returns if the latest year is weak.

Risks to weigh

  • Break costs, discharge and application fees can reduce or remove the benefit.
  • A lower property valuation can limit the new loan.
  • A declined application still adds a credit enquiry. [Moneysmart (ASIC)]

Next steps

  1. 1Gather your lodged returns, financial statements and recent loan statements.
  2. 2List all switching costs from your current lender.
  3. 3Ask us to compare staying, a lender review and refinancing.

Common follow-up questions

It depends on the lender. Requirements differ and change, so we check current policy for your situation before you apply.
A new lender compares your lodged figures with your current loan. Large differences need a clear explanation.
Some lenders will review or convert a loan once full documents are available. Ask them first; it may be simpler than refinancing.

Sources

Related guides

Low-doc loans Self-employed home loans Refinancing Insights

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General information about credit only. It is not tax, financial, superannuation or Centrelink advice and does not take your objectives, financial situation or needs into account. Lender policies change; any loan is subject to lender assessment and approval.

Ding Financial Pty Ltd t/a Local Knowledge Finance, Corporate Authorised Credit Representative 517980 of Global Mutual Funds Pty Ltd (ACL 222640). Sydney · 02 8338 8900 · [email protected]

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