When it comes to choosing a mortgage, it’s important to remember that you have other options besides getting a traditional home loan from the bank.
Non-bank mortgages have become increasingly popular in recent years as Kiwis look for alternative ways to get onto the property ladder. In fact, official figures from the Reserve Bank show that non-bank institutions increased their lending on property by 27 percent between January 2018 and August 2018.
Not sure if non-bank lending is right for you? We’re here to help. We’ve rounded up all the information you’ll need to make a more informed choice when the time comes to take out a home loan.
Read on to learn more about non-bank mortgages and how they can benefit you as a borrower.
What is non-bank lending?
A non-bank lender, sometimes referred to as a second tier lender, is a financial institute that is not a bank. The main types of non-bank lenders include credit unions and building societies. As it stands, non-bank lending only makes up about 2 percent of the total home loan market, but the industry is slowly growing.
The main difference between a bank mortgage and a non-bank mortgage is that the latter is not bound by the same laws and restrictions that apply to conventional financial institutes. Banks are heavily regulated by the government, which means borrowers have to meet strict criteria (especially in regard to credit history and loan-to-value restrictions) if they wish to secure a bank mortgage.
In contrast, non-bank lenders are privately owned and are not subject to the same restrictions as banks, which gives them much more freedom over their lending criteria and mortgage products. In addition, non-bank lenders do not have a banking license, which means you can’t open a deposit account with them.
Why do people choose non-bank lending?
1. Bad credit home loans
Non-bank lenders understand that there are many reasons why someone might have a black mark against their credit rating and that it shouldn’t exclude them from borrowing money. Many non-bank lenders offer bad credit home loans, which allow people with poor credit history to secure a loan, albeit usually at a higher rate due to the perceived lending risk.
2. Faster approval process
It’s no secret that the New Zealand property market moves quickly. Non-bank lenders tend to process loan applications much faster than the big banks that are bogged down in corporate bureaucracy. This helps speed up the pre-approval process and allows you to capitalise on any opportunities that may arise.
3. Personalised service
Non-bank institutions have a much looser structure than traditional banks. This allows them to provide a more personalised experience and tailor their products and services according to the needs of the individual customer. Whether you have poor credit, a low deposit or are self-employed and can’t prove your income, non-bank lenders can often find a solution where banks can’t (or won’t).
Are non-bank mortgages safe?
One of the big misconceptions surrounding non-bank mortgages is that they are unsafe. All the major banks in New Zealand are widely recognisable, which makes them instinctively feel more safe and trustworthy to the general public.
Non-bank lenders, on the other hand, are relatively obscure and do not carry the same status or brand recognition as the big banks. This can lead to the unfounded belief that they are less trustworthy.
In reality, borrowing from a non-bank lender is no more risky than borrowing from a bank. In the event that you’re unable to repay your loan, you’ll follow the same legal path as you would if you had borrowed from a bank.
What makes iLender the non-bank lending experts?
With more than 20 years of experience in the home loan market, iLender is your number one choice when it comes to non-bank mortgages in New Zealand. As an independent mortgage broker, we can honestly say that we have your best interests at heart and simply want to help you find the home loan that best suits your needs.
Want to learn more about non-bank mortgages? To discuss your options, give us a call today on 0800 536 337 and we’ll tell you almost immediately what can be done and what you need to do to get your New Zealand home loan.
At iLender we put your best interests first and not the Bank - our advice is impartial as all Lenders who we do business with pay about the same in commissions.
Although we are Auckland based Mortgage Brokers, we help customers everywhere in New Zealand and overseas with buying property in New Zealand, as we are very much about online and giving advice here and now!