It’s interesting times alright, especially in the residential loan market. We have 4 (5 if we include our Government owned bank) main banks, plus a handful of smaller banks who lend the majority of residential borrowers in NZ.
But what if you don’t qualify for a bank lend? Or what if you want to borrow against your house or land but you don’t want to or can’t service the loan. In these cases there are a growing number of lenders who operate in the ‘non-bank’ sector. Previously they were known as second tier or third tier lenders, but they have rebranded as non-banks and there is an absolute requirement for them.
So why would you use a non-bank? There are a number of reasons and this list isn’t exhaustive:
- You have had credit issues/ bankruptcy in the past. This speaks for itself, main banks might not be comfortable with your risk, but some non-banks operate in this area.
- Your income is lumpy or you are a contractor or self-employed. Either you have been contracting/self-employed for under 2 years or you are on short term contracts – again some banks can’t get comfortable with this, but a couple of non-banks specialise with these clients.
- The product you are after is short term or you don’t generate income until you sell. Some non-banks specialise in residential development, some specialise in property trading.
Due to the risk the non-bank are taking on, lending can be more expensive. There may be a loan application fee, an advisor fee and higher rates than payable to the banks so I will always discuss this with you early on.
It’s all about horses for course. With my clients I will always aim to get your home loan through a bank. However in some cases, for a variety of reasons this isn’t achievable. In these cases we will work towards a non-bank solution, but get you back to a bank as soon as possible.
If you need to chat about whether a bank or non-bank is right for you please send me an e-mail and we can catch up.