When your banks say "NO"

Not all loan proposal are acceptable in mainstream banks, there are applications which sit outside their lending risk appetite or they just don't make the cut. The next solution is what we commonly called "Non-Bank Lenders" or some call them "Second Tier Lenders".

So, who uses Non Bank Lenders?

People who flip and trade properties, developers, long term buy-and-hold investors, have bad credit, or self-employed business owners etc. There are many Non-Bank Lenders out there which offer different mortgage products and structures for different borrowers. They take more of a risk based approach so they can offer some lending solutions which mainstream banks can't offer.

In our view they can also break down into 2 types of Non Bank Lenders. One is more of long term solution, and the other one is more of short term solution.

Resimac, BaseCorp, Pepper Money, Liberty, Bluestone are all familiar names in the Non Bank space here. These lenders are all legally regulated in NZ and many of them have head office in Australia. One of the non bank lenders, Resimac, has some cool products where you can get 80/80 loan, which they will lend up to 80% LVR on your owner occupied property, and also up to 80% on your rental investment property. In a mainstream bank this would only be 80/60 loan. You can potentially buy a rental property with less cash deposit in this case.

These lenders usually offer Prime, Specialist, Full Doc, Alt Doc products depends on the risk level of the borrowers and requirements; and they have basic but flexible lending criteria and they assess your application in a case by case manner. They treat and view your financial in a more open minded way and they really use common sense to lend you money. They usually come back with a decision turnaround very quickly within 1-2 days!

The short term Non Bank Lenders are usually great for developers or people who do not have sufficient financial income proof but they may need a bridging or short lending solution. These lenders focus highly on the securities and LVR. They consider the location and condition of security and the terms are generally within 12 months, or up to 24 months. People who want equity release for a project or cashflow but be able to repay the funds in a short period of time, they can top up from their properties. Property developers found it hard to borrow money from mainstream banks with many conditions such as pre-sale, QS report, valuation report etc. They turn to non bank lenders and rely on their experiences for better and quicker lending solutions. A clear exit strategy is particularly important in these short term lending.

There are 20 to 30 non bank lenders in the market and just like mainstream bank lending, all banks have different policies and appetite to some borrowers, the same goes to non bank lenders. I highly recommend borrowers to seek advice from mortgage advisers for their lending options, and if our advisers recommend non bank lenders to you instead of mainstream banks, we will provide a reason and explain to you the pros and cons of this option. You can save time and hassle going through each one of them. Their interest rates and fees are generally based on your situations, and the higher the rates the higher the risks are usually the understanding.

Marchy was awarded #1 Adviser at one of the non bank lenders for the most settled loan amount in 2019, and he has just documented $5m new lending at 2 different non bank lenders this month. We have the solid experiences in non bank lending space and we are more than happy to discuss your next lending proposal.

The opinions expressed in this article should not be taken as financial advice, or a recommendation of any financial product. SuperCity Mortgages & Insurance shall not be liable or responsible for any information, omissions, or errors present. Any commentary provided are the personal views of the author and are not necessarily representative of the views and opinions of SuperCity Mortgages & Insurance. We recommend seeking professional legal and/or mortgage advice before taking any action. Our Disclosure Statements are available on our?website.