Myths V’s Facts – Lending
What goes down always goes up!
We have very frustrated buyers at the moment as getting finance from banks is getting increasingly difficult. Let’s touch on the myths of second tier lenders… Most think that the interest rate they charge is a lot more than banks. But is it, if you go to https://www.interest.co.nz/borrowing you will find bank rates and non bank rates being second tier lenders.
What goes down must come up and a good example of this is mortgage rates and that is the same with real estate. Over the last year real estate has taken a downturn but it is on its way back up. It only stands to reason with record immigration the tables are going to turn as there won’t be enough houses on the market to fulfil demand, hence a house prices rise.
One has to think very carefully regarding options. If you can purchase a property for $100,000 less than you perhaps will in six months’ time the 1% - 1.5% extra from a second tier lender may not seem so bad when you work out the sum!
Did you know that in Australia 20% of the mortgage market is made up of second tier lending. More and more people are failing to meet the tough criteria the main New Zealand banks have set.
How do I find a good second tier lender? Do I still have to use a mortgage broker
Yes, it is still in your best interest to use a mortgage broker. Why? Because there are up to 20 non-banks. A broker will go a long way to finding the right one for you and your situation.A mortgage broker will steer you in the right direction.
Do second tier lenders charge sky high interest rates?
Traditionally it is being thought that second tier lenders, charge substantially higher interest rates. That's not always true. It really depends on you, your situation, and how much risk you pose to the lender. That’s because 2nd tier lenders work on risk-based pricing.
Second tier Lenders V’s Bank – Which one am I better off with ?
Second tier lenders have an unfair reputation as being a bit “dodgy” Not only is this reputation untrue, but it can put up an unnecessary barrier for investors looking for a viable and professional alternative to the main banks.
Let’s set the record straight. Second tier lenders are tightly regulated, professional and responsible lenders.
So, what’s on offer?
Second tier lenders take a pragmatic approach. That means they assess loan applications on a case-by-case basis. There aren’t any hard and fast rules about who they will and won’t lend to. This is different for banks, who can live and die by some of their lending criteria. But it’s important to note both institutions are governed by the same laws.
Second tier lenders are not the cowboys you may have heard – they are consummate professionals tightly regulated by consumer credit governing bodies.
If you can get approved by a main bank, you’d typically go with them. BUT, if you can’t get through their lending criteria no problem it’s time to talk to a second-tier lender. (source Opex Partners)