Despite a difficult property market and harsher rules around lending, people still want to get into their own homes. That’s where non-bank lenders come in. This month’s guest blogger, specialist non-bank mortgage broker Kim Lyons, www.nonbank.co.nz explains why so many people are looking for other finance options.
Different people, different problems
We get a wide range of people seeking help. They may be first home buyers, people looking to refinance or consolidate debt, or business owners needing to pay tax after a tight holiday period. Most of the people who approach us for help have spoken to the bank and been turned away already – we’re aware that we’re providing a Plan B for them.
Outside the banking box
Because banks offer very low interest rates, we always consider them as a first option. Sometimes, we’re able to get a client a mortgage with the bank even if they thought they weren’t eligible.
But we also have many clients and proposals that simply don’t meet bank criteria – this is sometimes due to poor credit or missed loan repayments. We’re also seeing more and more clients who have the income to service a mortgage, but can’t prove it to the bank. This includes contract workers and small to medium business owners. Under lending rules, the banks just can’t comfortably approve a loan to these people, which can be very frustrating for the borrowers. Often, we’ll find that clients choose to simply put their financial goals on hold indefinitely, because dealing with the bank becomes too hard. This isn’t ideal for anyone.
Short term solutions
Non-bank lenders are a great option for some clients because they often have more flexible lending criteria. On the downside, their interest rates tend to be slightly higher. That’s why non-bank lending options are usually a Plan B when approaching the bank fails.
We think of a non-bank loan as a short-term solution, a stepping stone to get you across a difficult period rather than a permanent option.
These loans can range from just three months to as long as three years. The goal is to get back to bank finance as soon as possible. When this can be done really depends on the client and their situation – sometimes they will be waiting for the sale of a property or business, or they’ll need to clear some IRD debt. Some clients need a period of steady loan repayments to demonstrate reliability, and repaying their loan to a non-bank lender for 1-2 years can do that.
Stick to the specialists
If you’re seeking a non-bank mortgage or personal loan, it’s a good idea to talk to the experts first. While there are many reputable non-bank lenders in the marketplace, the interest rates, terms and fees can vary greatly, and you may not get the best solution for your circumstances.
A good non-bank broker will ask about your financial situation, listen to your goals, and give you a range of finance options. They should also help you plan an exit strategy to get you back to the bank as quickly as possible.