As experienced finance broker, we’re always able to find solution when your bank say no. One of the secrets is that we can access more lenders and understand their value. We recognised the need to make you aware that your traditional banks do not hold all the strings, there are other options.

The term “non-bank lending” or “second tier” refers to those lenders who provide lending services but are not the traditional registered banks such as ANZ, Westpac, and BNZ. When your bank or current lender says no, non-bank lenders may give you more lending options.

At Prosperity Finance, we deal with many reputable non-bank lenders all over New Zealand who offer more flexible solutions to suit your needs, rather than complying with the lending policy of traditional banks that you may not be able to meet. In this video, Kevin Zhou, a senior lending manager from ASAP Finance, explained how non-bank lenders work differently compared with banks, and also discussed the scenarios where it would be better to work with a non-bank lender.

ASAP Finance is a leading non-bank lender offering residential, commercial and development finance all over New Zealand, such as property development finance, equity release, and bridging finance.

Non bank lenders nz

Video Timeline:

1. Banks vs non-banks: why people choose non-bank lenders - 02:48

2. How do Non-bank lenders charge? - 06:29

1. Banks vs non-banks: why people choose non-bank lenders

There are several pros and cons of non-bank lenders versus banks. Here are two main reasons why people choose to work with a non-bank lender over a traditional bank.

(1) Non-bank lenders focus more on the project than your background

The first advantage of non-bank lenders is, when you apply for a loan from a bank, they will assess your background (incomes, expenses, account conduct etc.) thoroughly and do due diligence on the property to make a decision. But if you work with a non-bank lender, they tend to focus on the property itself rather than your background. So, if your circumstance does not seem to work for your bank and your bank said no, then you may need to consider working with a non-bank lender.

(2)  Property development finance have much short turnaround time

What’s more, most of New Zealand banks at the moment have two to three weeks turnaround time while non-bank lenders cut the processing time to 2 to 5 working days.

For example, the clients had eyes on a piece of land, which probably could redevelop it into seven or eight townhouses. But their bank couldn't help because the auction was around the corner and the bank won’t have enough time to provide approval outcome. Then the clients looked for help from a non-bank lender (ASAP Finance). They looked at the property files (plan, consents etc) visited the site, and said yes on 70% funding. Eventually the clients purchased that piece of land smoothly. Now they are working with ASAP Finance for this ongoing development project which is estimated to have the margin of 23%.

The main reason they can act so quickly is because non-bank lenders have deep understanding about the property itself and some even do property development themselves. They do not have to rely on external advisers such as QS or registered valuate to provide expert opinion on the project and the property market.

Another example, if you work with banks or some other financial institutions on a construction progress drawdown loan, they may not be able to release the funds until you provide lots of documents to meet the drawdown conditions such as QS report, valuation report etc. As a result, it may delay the whole project But at ASAP Finance, they process your request very quickly so that you have enough cash flow to keep your project going.

(3) Equity release: non-bank lending solutions for those who do not meet the banks servicing test

If you need to borrow money against your existing properties, but you do not meet the banks’ servicing criteria, you bank can’t help you. However as long as you have strong equity in your property, non-bank lenders have solution for you.

For example, we had a client who was going through divorce with her ex. She was studying at the time they split their assets so she couldn’t borrow enough from her bank to complete the matrimonial settlement. However due the loan to value ratio is only 40%, we were able to help her find solution quickly with a non-bank lender. She has now finished her study and is working full time. We are now helping her refinance her loan to a main bank to save some interest cost.

2. How do Non-bank lenders charge?

When you work with non-bank lenders, generally there will be some additional cost involved. As mortgage brokers, we’ve been asked a lot how non-bank lenders charge?

The non-bank lenders generate income in two ways, and here we use ASAP Finance as an example:

• Interest rates: the interest rates that a non-bank lenders charge are sensitive to the level of risk and the term of the loan. Typically, it varies from 5.95% to 12.95% p.a.. The longer the term, the higher the interest rates.
• Fee (quoted as a percentage of the loan amount): ASAP Finance charges an application fee of 2%. Some other lenders may also charge admin fee, line fee etc on a case by case basis.

Why do non-bank lenders charger higher interest rates than the banks?

Non-bank lenders charge higher rates than those offered by traditional banks. This is because their interest rates are risk driven and also have a different funding sources from the banks. Despite the Reserve Bank have cut the OCR, most of the non-bank lenders are funded by investors and shareholders. So the change in OCR does not lower the cost for non-bank lenders.

Although non-bank lenders do have slightly higher interest rates than banks, in some cases they can help you save more at the overall level. For example, say you want to apply for a property development finance from your bank, they will require many conditions which are normally not required by non-bank lenders, such as pre-sale, QS Report, and fixed price contract etc. All these added up may cost more than the saving of finance costs. Not to mention you may miss the best season for subdivision/development and potentially not be able to sell your property at its best market price. 

Prosperity Finance – here to help

We deal with mainstream banks and a large number of non-bank lenders. Call us at 09 930 8999 today to see how we can assist you with non-bank home loans or property development finance if you are struggling with your bank.   

Disclaimer: The content in this article are provided for general situation purpose only. To the extent that any such information, opinions, views and recommendations constitute advice, they do not take into account any person’s particular financial situation or goals and, accordingly, do not constitute personalised financial advice. We therefore recommend that you seek advice from your adviser before taking any action.