When making the crucial decision to apply for a home loan you might think it is important to go directly to a mainstream bank lender as they will have the best product on offer, or even the financial institution who you have been dealing with for the last 15 years with your savings and transaction accounts. This is where talking to an experienced mortgage broker will come in handy and work in your favour as there are alternatives when it comes to the lending options available and in many cases utilising the services of a non-bank lender can have significant advantages and can be a suitable option depending on your current financial situation and what you are looking to achieve.
What is a non-bank lender?
A non-bank lender is a lender that is not a bank, credit union or building society. Each lenders have their own source of funding which is lent out with a margin for profit. The specific lender may also be a company or individual who has the ability to borrow money from a bank with wholesale rates and then lends out the funds with a profit margin added. Any experienced mortgage broker will work with both banks and non-bank lenders to ensure the most suitable option is sought to meet your short and long term goals.
Non-bank lenders are regulated by the Australian Securities and Investments Commission (ASIC) and the Consumer Credit Code and this means they must abide by the same rules and regulations of the Consumer Credit Code when providing loans and other credit products just like a mainstream lender. Non-bank lenders do not hold an Australian banking licence which means they cannot offer such products as savings accounts, transaction accounts, and term deposits. Because of this they are not regulated by the Australian Prudential Regulation Authority (APRA).
What services does a non-bank lender provide?
- Basic Home Loans – Basic Home Loans are variable rate loans or fixed rate loans exactly what the name suggests but with fewer bells and whistles in terms of features.
- Full Feature Home Loans – Full Feature Home Loans are the same as Basic Home Loans but have added benefits and features such as offset accounts, redraw facility and the ability to make additional repayments.
- Low Doc Home Loans – A Low Doc Home Loan is a home loan product that requires significantly less documentation and paperwork when applying compared to a standard full doc home loan.
- Split Loans – Split Loans can give borrowers the best of both worlds of a fixed rate portion and variable rate portion for those who are not sure whether they want to fix their whole home loan, don’t hesitate to talk to your mortgage broker about what will be most suitable for you.
- Bad Credit Home Loans – Bad credit home loans are exactly what the name suggests they are a home loan product that enable someone with a poor credit history to still have the ability to qualify for a home loan. A higher interest rate will generally be offered along with a higher application fee to compensate for the increased risk the lender is taking.
- Reverse Mortgage Loans – used by seniors who need to access specialist funding to release equity in their home to support their lifestyle needs – these loans have unique servicing and repayment guidelines which some non-bank lenders facilitate.
What benefits can be achieved with a non-bank lender?
Please find below some of the common benefits associated with utilising the services of a non-bank lender:
- Lower overheads generally meaning lower amount of fees charged
- More flexibility with loan conditions
- Higher level of personalised customer service
- Quicker approval turnaround time
- Range of product choice
You will find there will be a number of pros and cons for both big banks and non-bank lenders each depending on one’s personal and current situation. If you engage with the services of a mortgage broker this will work in your favour as they will endeavour to find the most suitable option for your situation. Your mortgage broker will be able to explain which lender is most suitable for you and outline the benefits of utilising the proposed lender option. If you have any queries or a question regarding specific information around non-bank lenders and what finance options are available to you, don’t hesitate to talk to your mortgage broker Gerry and he will be able to assist with answering any questions.