Low Doc, No Doc, and Alt Doc Construction Finance. What's the Difference?

If you've started looking for construction or development finance in Australia, you've probably come across terms like "low doc," "no doc," and "alt doc" and wondered what they actually mean for your borrowing options.

The short answer: they describe how much income verification a lender requires before approving your loan. The longer answer has a real impact on your loan size, interest rate, speed to approval, and which lenders will even consider your deal.

This guide breaks it all down, including how lenders calculate how much they'll lend, and where Settled Funding Group can help.

Why Documentation Type Matters in Construction Finance

Construction and development lending is already more complex than a standard home loan. Lenders are funding something that doesn't exist yet. They need confidence in the borrower, the project, and the exit.

The way a borrower proves their financial position is a key part of that picture. Not every borrower has clean tax returns, a PAYG payslip, or two years of business financials. Property developers, the self-employed, and investors with complex income structures often need lending solutions that reflect how they actually operate.

That's where the doc type comes in.

The Four Loan Types Explained

Full Doc

Full documentation is the standard benchmark. The borrower provides:

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  Two years of personal and/or business tax returns
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  Financial statements
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  ATO notices of assessment
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  Evidence of all income sources

Major banks operate primarily in full doc territory. The upside is access to the lowest interest rates and the highest LVRs available. The downside is the time involved in preparing documents and the rigidity of credit assessment. If your income is variable, trust-distributed, or structured through a holding entity, full doc can be difficult even when you're financially strong.

Typical lenders: Big four banks, tier 1 non-banks
May suit: PAYG borrowers, borrowers with clean financials, lower-risk projects

Low Doc

Low documentation loans are designed for self-employed borrowers and investors who can't easily produce traditional financial evidence but can demonstrate their income through other means.

Instead of full tax returns, a low doc lender typically accepts:

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  A signed income declaration from the borrower
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  An accountant's letter confirming the declared income
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  Business Activity Statements (BAS) for the past 12 months

The lender is taking the borrower's word, supported by professional sign-off. This requires an accountant in the loop but removes the need for full audited financials.

Low doc is the most common non-full doc option in Australian lending and is available across a wide range of bank and non-bank lenders.

Typical lenders: Non-bank lenders, some tier 2 banks, specialist mortgage lenders
May suit: Self-employed borrowers, small business owners, investors with complex income structures

Alt Doc

Alt doc, or alternative documentation, is often used interchangeably with low doc but has a specific meaning: the lender accepts alternative evidence of income rather than standard tax-based documents.

This might include:

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  Bank statements (typically 6 to 12 months)
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  BAS statements
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  Accountant declarations
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  Rental income statements

The key difference from low doc is flexibility in what evidence is accepted. Some alt doc lenders don't require an accountant at all and will rely purely on bank statement analysis. This can speed up turnaround significantly.

In our Blacktown case study, an alt doc lender approved a $1 million construction loan for a house and granny flat using an accountant declaration, with formal approval reached in two weeks from inquiry.

Typical lenders: Specialist non-bank lenders, private lenders
May suit: Borrowers with strong cash flow evident from bank statements but limited formal financial records

No Doc

No documentation means exactly that. The lender does not verify income at all. The loan is assessed entirely on the quality of the security and the strength of the project.

For construction and development, this means the lender is assessing:

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  The property being used as security
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  The project itself (plans, permits, builder, feasibility)
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  The gross realisation value (GRV) or total development costs (TDC)
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  The exit strategy: sale, refinance, or lease

No doc loans carry trade-offs. Rates are higher and LVRs are typically lower than other loan types. Almost all no doc construction lending sits with private or non-conforming lenders. Whether this type of facility is appropriate depends entirely on the borrower's situation, the project, and what other options are available.

In our Miranda case study, a no doc private loan at 70% of GRV was one option explored for a duplex construction with a capitalised interest structure. In the Ashfield boarding house case, a no doc facility was among the solutions considered for a complex 30-room mixed-dwelling project.

Typical lenders: Private lenders, non-conforming lenders, tier 3 non-banks
May suit: Short-term construction and bridging scenarios, complex or non-standard projects where other lender options have been assessed and exhausted

At a Glance: Doc Type Comparison

How Lenders Actually Calculate How Much They'll Lend

This is where construction finance differs significantly from standard home lending, and where a lot of borrowers get confused.

There are two key methods lenders use to calculate maximum loan size:

1. Total Development Costs (TDC)

Some lenders base their loan on a percentage of the total development costs. TDC includes:

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  Land value (or existing debt on land)
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  Construction costs
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  Consultants, planning, and approval fees
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  Finance costs and holding costs
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  Contingency allowances

A lender offering 70% of TDC on a project with $1.45M in total costs would lend $1.015M.

This is common with alt doc and some non-bank lenders on straightforward residential builds. Our Blacktown house and granny flat deal was structured this way, with a $1M loan against $1.45M in total development costs.

TDC-based lending is more conservative because it anchors to what the project costs, not what it might be worth.

2. Gross Realisation Value (GRV)

GRV is the projected end value of the completed project, as assessed by an independent valuer. A lender offering 70% of GRV is lending against what the property will be worth once the build is finished, not what it costs to build.

This approach can unlock significantly more capital, which is why it's the standard for private, no doc, and complex development lending.

In our Miranda case study, the project had a GRV of $4.8M. A 70% GRV facility meant the client could access $3.36M, which was far more than a TDC-based calculation would have produced.

GRV lending requires a formal valuation and is typically used on:

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  Duplex and multi-dwelling developments
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  Boarding houses and mixed-use projects
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  Built-to-hold strategies where the exit is refinance, not sale
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  Any deal where construction costs are low relative to end value

The practical difference:

If your project costs $1.5M to build but will be worth $4M on completion, a TDC lender at 70% gives you $1.05M. A GRV lender at 65% gives you $2.6M. The gap is significant and can be the difference between a project being feasible or not.

Capitalised Interest: Why It Matters for Construction Deals

Many construction and development loans are structured with capitalised interest. This means interest is not paid during the build. It is added to the loan balance and repaid at the end, either from the sale of the property or on refinance.

This is critical for projects where the borrower has no income stream from the asset during construction. It removes the monthly cashflow burden and allows the borrower to focus on completing the build.

The Miranda duplex deal used a capitalised interest structure with 18 months of zero repayments. The Wallsend townhouse project used the same approach, with the planned exit being a refinance into a low doc loan once the properties were tenanted.

Capitalised interest is almost exclusively offered by private and non-bank lenders. Major banks rarely allow it.

Lender Types and Where Settled Funding Group Operates

The Australian lending market for construction and development is tiered:

Major Banks (Big Four + Macquarie)
Full doc or very strong low doc. High LVRs. Lowest rates. Strict credit policy. Long turnaround times. Suitable for clean residential builds with experienced borrowers and standard income structures. Our Drummoyne luxury duplex and Hurstville owner-occupied home were both placed with major banks.

Tier 2 Non-Bank Lenders
Full doc to low doc. Flexible on income evidence. Competitive rates. Good for borrowers who don't meet bank credit policy but have clean projects and demonstrable financials.

Tier 3 Specialist and Non-Conforming Lenders
Low doc to alt doc. Willing to lend on more complex projects and income structures. Higher rates than tier 2 but wider credit appetite. Our Wallsend built-to-hold townhouse deal used a tier 3 non-bank lender.

Private Lenders
No doc to low doc. Assess primarily on security and project quality rather than borrower income. Faster approval and settlement timelines in many cases. Higher rates than other lender tiers. Private lending may be one option worth exploring for urgent deals, rescue finance, or complex projects, but it is not the default recommendation and should always be considered alongside other available options. Our Miranda, Ashfield, Five Dock, and Gymea deals are examples where private lending was the solution reached after assessing the full range of options available for each specific situation.

A Note on Private and Non-Bank Lending

Private and non-bank lenders are a legitimate part of the Australian construction finance market. For some borrowers in some situations, they may be worth exploring as part of a broader assessment of what is available.

They are not, however, the right solution for everyone. Higher rates, shorter loan terms, and lower maximum LVRs are real considerations that need to be weighed carefully against the alternatives. The goal is always to find the most appropriate option for each borrower's specific circumstances, not to default to any particular lender type.

As a broker, Settled Funding Group does not favour any lender or lender category. Our role is to understand your project, assess what options may realistically be available across the full market, and help you make an informed decision from there.

What Doc Type May Be Relevant to Your Project?

There is no single right answer. The appropriate doc type depends on a range of factors including:

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  Your income structure and ability to produce documentation
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  The complexity of the project
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  The LVR required to make the deal work
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  Your timeline
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  Whether a capitalised interest structure is needed

The doc type that a lender requires will also vary depending on which lenders are willing to engage with a specific project. What works for one borrower and one project may not work for another. The best outcome comes from assessing the full range of options available rather than assuming one path is appropriate before exploring all of them.

How Settled Funding Group Can Help

Settled Funding Group works across the full spectrum of construction and development finance. We do not favour any lender type. Our role is to assess your situation honestly and help identify what options may be available across the full market, whether that leads to a major bank, a non-bank lender, a private facility, or a combination depending on the stage of your project.

We can assist you to source capital from $200K to $15 million to complete your build, drawing on a lender panel of 90+ bank, non-bank, and private lenders.

If you have a project and want to understand what may be possible, speak to Settled Funding Group.

Joseph Farhat

Director, Settled Funding Group