Time to buy a home? As it happens, if you’re flying solo in your career and have some mortgage goals, you may need to look out of the box for an appropriate solution.
While banks are the traditional borrower’s go-to option, if you’re self-employed, they may not be a good fit for your situation. And this is where non-bank lenders – coupled with quality mortgage advice – may help you out. Here are some key things to know.
What is a non-bank lender?
What happens when a bank says ‘no’ to your mortgage application? Usually when banks turn someone down, it is because the loan application doesn’t meet the minimum criteria of any of the key factors they are looking at, like affordability measures, credit records, steady income, etc.
If you were unable to meet the bank’s requirements, however, you may still have options elsewhere; for example, as we said, non-bank lenders may be worth considering. Before we delve into this, remember: if you’re ever stuck on your homeownership journey, our advice may help guide the way forward.
So, what are non-bank lenders? Non-bank or ‘second tier’ lenders are financial institutions that offer loans and credit, but aren’t a traditional registered bank (like ANZ or Westpac) and don’t hold a NZ banking licence.
Because many non-bank lenders are not subject to the oversight of the Reserve Bank, they have more flexibility with lending structures and criteria. This means that a non-bank lender may be the answer if you fall outside the mainstream lenders’ box.
For example, although they will still need to check that you’re financially capable of servicing the mortgage as well as meeting your other expenses, they may not necessarily want to see a steady income demonstrated (which can help self-employed people)..
Unsure where to start, and whether banks or non-bank lenders are an appropriate fit for your situation? As mortgage advisers, we can help you understand your options in more detail.
How non-banks can help your situation
When it comes to bigger loans like a mortgage, you might think that traditional banks hold all the cards – but the good news is, that’s not completely true. While banks continue to be the majority lenders in New Zealand, in some circumstances, non-banks can also be a good option to consider.
Here’s why:
- If you’re self-employed, your income may not be steady (some industries can have lumpy cash flow), and you might be doing your own financial documentation. Non-bank lenders may be able to work with that – they might look at your complete financial picture and be more focused on that ‘big picture’ rather than just uneven income.
- Just like banks, non-bank lenders must follow the Responsible Lending Code, but they aren’t subject to Reserve Bank lending restrictions like the Loan-to-value ratios (LVRs). This might mean that you may be able to secure a loan with a lower deposit.
Key things to keep in mind:
- Non-banks can sometimes have higher fees and/or interest rates, so it’s key to compare rates and fees with different lenders.
- You will have your mortgage outside of your usual bank, which might make things quite inconvenient for you when it comes to repayments and other financial transactions.
- Regardless of your situation, any lender (bank or non-bank) will need to ascertain that you can comfortably pay off your loan.
All in all, mainstream lenders aren’t the only route to making your homeownership dreams come true. So, before you make any financial decisions, it’s a good idea to spend the time doing your research, as well as seek professional advice for your questions.
Like to discuss your needs?
As advisers, we can learn more about your saving habits, your whole financial picture, and recommend a lender that may be a good fit for your unique situation. If you’d like to know more, don’t hesitate to reach out – we’re here to help.
Disclaimer: Please note that the content provided in this article is intended as an overview and as general information only. While care is taken to ensure accuracy and reliability, the information provided is subject to continuous change and may not reflect current development or address your situation. Before making any decisions based on the information provided in this article, please use your discretion and seek independent guidance.