WHAT IS A LEASE-DOC LOAN?
Let’s talk about lease-doc loans! Lease-doc commercial loans are loans for purchase, refinance or equity release where the lender assesses a client’s affordability only relying on the strength of the rental income from the property used to secure your loan. This type of loan is not very common with lenders, but can be found amongst a small number of lending institutions.
This is suited to investors who are unable or unwilling to provide any form of income verification and want the security of a ‘set and forget’ loan without the need for annual reviews and line fees.
Normally, you could borrow up to 65% of the property value, where some could go up as high as 70. No payslips, tax returns, bank statements, BAS or financial statements are required. The security cannot be specialised, meaning, it should be able to accomodate a wide variety of tenants and/or business types. It can’t be owner-occupied either, and the lease must have at least 12 months remaining.
Check out the frequently asked questions below. If you’d like to discuss more, speak with us today and see how we could help!
Commercial lease-doc frequently asked questions
Q: How do they assess the lease income?
A: The application/ servicing is based upon the full lease agreement or rental payments only. The net rental must meet a minimum of 1.2 times interest cover
Q: What if I am just signing a lease now?
A: It’ll be considered on case by case basis, although existing lease is always preferred. Most lenders will require the lease to be fully executed and a bond paid before they will advance the loan.
Q: Which lenders offer lease doc loans?
A: Major banks do not normally offer lease doc loans. Second tier banks, non-bank and specialist lenders are the main providers of lease doc loans.
Q: What are acceptable securities?
A: Non specialised commercial (retail, industrial, office or warehouse) located in a major metro or regional area. You can use a commercial lease doc loan on a residential property if your loan is not NCCP-regulated. A lease to your own business, family member’s or related business entity doesn’t count as income evidence.
Q: What are the loan terms?
A: Most lenders review the loan term in line with the renewal of the lease while others have a set 5, 15 or 25 year term.
Q: What’s the lease-doc interest rate?
A: Because this is a specialised product, interest rate will be slightly higher than full-doc loan products. Lower the LVR, lower the rate will be.
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