Rise and rise of the Non Major Lenders
The Reserve Bank have significantly changed the lending landscape in New Zealand over the last 3 years. The most recent move further stifling major banks ability to provide what mortgage seekers need in many instances.
This has made Loan Markets portfolio of non major lenders more relevant than ever and they are thriving as a result.
With more changes anticipated it’s time to familiarize yourself with our alternate options as we have solutions that you may not realise exist.
The RBNZ (Reserve Bank of New Zealand) recent changes have now reduced the banks cap from 15% to 10% for each banks lending >80% LVR which means currently there is very little lending available in the owner occupied space with less than 20% deposit. Investors require minimum 40% deposit to purchase existing property and 20% to build.
Why can non Major lenders deviate from legislation change?
RBNZ legislation changes only impact banks with other lenders able to maintain their own policies which is where the opportunity for borrowers exists.
When would you work with a non bank lender?
Typical examples at the moment we are experiencing are investors looking to add value to their existing property which are currently 80% LVR so the banks are scaling back to 60% before even considering it and depending upon the bank, they will not even consider the proposed increase in value until six months after completion.
We are therefore taking the property to one of our other lenders to carry out the renovations and upon completion presenting it back to the bank with valuation at 60% LVR. At this point they will accept and everyone is happy with a great short term solution.
Another example are clients income position has changed whilst being committed to a project. As long as there is good equity position we can support, capitalize interest repayments and manage the exit to a successful outcome.
Banks also have issues if clients have tax arrears, poor account conduct or credit issues. We can review this too enabling client to build up a better credit history and take back to a major bank.
Final point is that if anything is slightly grey the banks are saying no, regardless of how strong the client is leaving them frustrated and disillusioned but there are options and this is where we come in to assess and facilitate to the best lender for that situation.
What are the costs?
It really depends on the overall picture but rates vary from 5.00% to 9.95% and beyond depending upon situation plus a 2% establishment fee. Fees and interest repayments can be capitalized to assist cash flow. These are short term solutions so there is a cost but short term with a successful outcome.
What’s the process?
Supporting documents can be reduced sometimes in this process as long as the equity position is strong enough and the exit whether it be to a major bank or sale of asset is fully understood.
We are able to offer commercial lending and in a more pain free manner than major banks as this portfolio of lenders is more concerned about the asset than serviceability which provides more options for our clients.
Our non major lenders vary from institutions that simply choose not to be a bank due to costs and restrictions to investors that can gain a better return on their money with these lenders rather than leave in a savings account at a high street bank.
They key point for most of these options is a short term solution to serve a purpose and move back to a major bank or sell.
If you find yourself not meeting the banks criteria but still wanting to proceed with your project, call us now and we can discuss your options as you need a finance adviser more than ever to navigate you through this rough terrain.