Whether you are borrowing money from a bank or a nonbank, the lender carries all the risk. Here in New Zealand, many people believe that borrowing from non bank sources can be risky. While Americans get almost 90% of their mortgages from independent lenders, in New Zealand the number is under 25%. As a mortgage is most borrowers’ biggest single financial commitment so it makes sense to shop around for the best finance deal available including those from non bank home loan lenders in Auckland.
Banks are Profit Centres
All banks in Auckland, and the rest of New Zealand, subsidise low rates by cross-promoting other products such as credit cards, personal loans, and insurance. These products are not always in your best interest. Many borrowers take the bank’s word that they are getting the lowest possible rate, and they accept it without seeing what else is available. New Zealand’s three big banks are affiliated with ASB, which offers Sovereign products, and ANZ, which offers OnePath. Customer loyalty is a great thing, but an unquestioning customer can become a soft target for a profit-hungry bank.
The Advantages of Using an Independent Broker
By arranging a loan with the help of mortgage brokers in South Auckland, borrowers can avoid paying for expensive add-ons such as insurance. Brokers are unbiased, as all insurers and lenders pay the same commission. Therefore, the customer comes first in every instance.
However, if a New Zealander cannot borrow from a bank, does going with a non bank carry additional risks? Non bank home loans with bad credit in Auckland are priced to account for the additional risk, which simply means that lenders consider the customer’s circumstances in recommending products. Some lenders reward timely payments by reducing rates each year, with the goal to return to rates comparable to those available from New Zealand’s banks.
Are Non Banks Safe?
This is a common question, but it is often answered incorrectly. Non bank lenders follow the same rules that apply to banks. If you fulfil your part of the contract, you face no additional risk by going with a nontraditional lender. The worldwide financial downturn has brought about a significant amount of legislative change that protects consumers, and these changes apply to every lender in the country. Day-to-day banking stays where you want it, as non bank lenders do not insist on particular accounts or institutions.
There are two primary types of non bank lenders: short-term loan and mortgage. All lenders are funded by the banks in the main, and they offer different products for your unique circumstances. Essentially, it all comes from the same source, it just has different labeling. Short term loans are handled by finance companies, also funded partly by banks. Non Bank is very active in this particular market.
Advantages of Choosing a Non Bank Lender
There are tremendous advantages to choosing a nontraditional lender. Banks only profit when they lend money, and if you’re declined, you should look elsewhere. By choosing one of these lenders, you can have more choices when fulfilling your other banking and insurance needs. Other benefits include:
- Better customer service. With banks, you’re just a number. With a non bank lender, you’re a customer and you get treated like one.
- Those with poor credit are more likely to get approved. Some defaults are unavoidable, leaving low-credit borrowers with few options. However, the non banks will help.
- Non bank lending begins at a half year of trading, while banks want more substantial deposits and a longer history. Nontraditional lenders are better for the self-employed because the documentation requirements are less strict.
- Non bank lenders can help those just starting out. They offer up to 90% LTV and more if your income is sufficient. They are also willing to refinance significant debts.
- They have competitive rates even if you have arrears and bad credit.
Is it Worthwhile if the Rate is Higher?
The answer depends on your goals. If you want to get a toehold in the Auckland market, it’s a resounding yes. Even 2% over the bank’s rate is a minor price to pay for the better value that’s coming in the next few years. When you refinance, if you can adhere to your new budget and pay down your debt, it is a good thing—but you may pay a bit more in the long term.
New Zealand Law
The 2007 Property Law Act covers lending by all lender types on residential properties. This means that there is a clear path if something goes wrong and you get into arrears. If that seems to be the case, you should act quickly by communicating with your lender. In almost 90% of cases, solutions are available.
In some countries, there are many lenders from which to choose. It is different in New Zealand, as the banks control almost 95% of the mortgage market. Therefore, they control what is spent on personal loans, credit cards, and mortgages. Lack of competition is unhealthy, and it only hurts you, the customer. Non bank lending is on the rise, but there are still many New Zealanders who are unaware that the option is available. As you will get the money from the lender, there is no additional risk in borrowing from a nontraditional source.
Who Can Benefit From Non Bank Lending?
Almost anyone can benefit from home refinance in Auckland, but certain classes can in particular. If you have poor credit or you can only afford a small deposit, it may be for you. The self-employed often choose these lenders, as there are fewer requirements for income documentation. Whether you have a history of arrears, you need bridging finance for your Auckland home or you need to secure capital for a construction project just contact Non Bank (www.nonbank.co.nz). Their South Auckland mortgage brokers can help you find the best finance option for your mortgage.