Choosing a mortgage involves a great deal more than simply approaching your bank for a loan. Shopping around both bank and non-bank lenders is an important part of the process which, regrettably, too many Kiwis neglect to do. It’s true that non-bank lenders haven’t always enjoyed the best reputation, but more and more home buyers are discovering just how effective this type of lending can be, particularly when banks say no.
What is a non-bank lender?
Non-bank lending refers to securing a loan from an institution other than a bank, such as a credit union or building society. Most home buyers are able to secure finance from a bank, and with so many banks to choose from, it’s a logical first step for many.
However, for New Zealanders with a low deposit, those who are self-employed, and those with a less than ideal credit history, securing a loan from a bank can prove challenging. That’s when non-bank lending can be a viable option. In many cases, non-bank lenders will approve a loan previously declined by a bank.
Similarly, as lending restrictions have tightened, it’s become necessary for many home buyers to bypass traditional lending and look for alternative financial solutions. Non-bank lenders are not affected by LVR restrictions imposed by the Reserve Bank which means they can often provide a solution for first home buyers with a low deposit.
When would you use a non-bank lender?
Non-bank lenders may be an option for home buyers with bad credit history or a low deposit. They’re often a stop-gap for borrowers who have previously been declined by their bank or other lender.
In some cases, non-bank lenders may charge slightly higher interest rates than those offered by mainstream banks. But non-bank lenders have more flexibility when it comes to mortgage underwriting and can often offer products that better fit your unique situation.
Are there different types of non-bank lenders?
Non-bank lenders typically fall into two categories: Mortgages and short-term loans. The three big non-bank mortgage lenders in New Zealand are Resimac, Sovereign and Liberty. For short-term lending, there are a range of finance companies which are, for the most part, funded by mainstream banks.
What are the benefits to borrowing from a non-bank lender?
- More options when it comes to shopping around for a mortgage.
- Home buyers are not constrained by poor credit history, low deposit, or the inability to prove income when it comes to borrowing from a non-bank lender.
- Non-bank lenders are not restricted by Reserve Bank LVRs.
- The pre-approval process can be much quicker with a non-bank lender which can make all the difference when you need to move quickly on a property.
- Non-bank lenders are specialists in lending and can often provide a solution when banks say no.
Get advice from your adviser
Choosing a lender is not the only decision you’ll need to make when applying for a home loan. That’s why it’s important you seek advice from an independent adviser. Contact a Mortgage Express adviser who can assist you in navigating the home buying process, and help you choose the right lender to fit your situation.
While all care has been taken in the preparation of this publication, no warranty is given as to the accuracy of the information and no responsibility is taken by Mortgage Express Limited for any errors or omissions. This publication does not constitute personalised financial advice. It may not be relevant to individual circumstances. Nothing in this publication is, or should be taken as, an offer, invitation, or recommendation to buy, sell, or retain any investment in or make any deposit with any person. You should seek professional advice before taking any action in relation to the matters dealt within this publication.
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