Non-Bank or Second Tier Lenders

A Non-Bank lender, previously referred to as a ‘Second Tier Lender’, is an organisation you can borrow money from for a home loan, business purchase or cashflow reasons, construction or property development, debt repayment or finance of an asset. In more recent times, largely due to changes in behaviour of the main banks and their enthusiasm for ‘outside the box’ lending, they have grown their market share from three to five percent of the New Zealand lending market. This is predicted to increase to 10-15% within the next few years.

Non-bank lenders are funded in several ways including through the main trading Banks, Institutional Lenders the ‘Peer to Peer’ model, or self-funding. They all have their preferred niche and target client – e.g., property developers, long-term mortgages, property investors, business owners, discharge from bankrupt, asset finance.

The general ‘tiers’ within non-Bank lending are described below:

  1. Near Prime . This is a non-Bank long-term mortgage at close to Bank rates. Some lend up to 80% of the property’s value, including for investment properties, either as a standalone deal or ‘bundled’ with an owner-occupied property. Others take a more lenient view on existing borrowing and concentrate on the ‘numbers’ for the application, and the return achievable, meaning greater borrowing capacity in many cases.
  2. Specialist. A medium to long-term mortgage, usually without early repayment charges to allow rapid loan repayment and designed to help those who have suffered poor credit, are recently self-employed, or who cannot verify their income in the traditional way. The plan is to get to main Bank rates as soon as possible, perhaps through paying down the loan, or once financial statements are to hand.
  3. Short-term. Usual loan terms are to 12 to 18 months and installed to ‘fix’ something. The loan may be for renovations, a build/re-clad, subdivision, or a property trader. Often used to get people into a property, and refinance when the issue is resolved. For example, recently discharged from bankruptcy, recent self-employment, change of industry, new to New Zealand. The options are extensive; however, the theme is the same – a short-term issue that can be resolved and then the move to regular lenders.
  4. Second mortgage or Caveat lending. Usually for smaller sums and a shorter term, less than 12 months. Caveat lending is usually for sums up to $100,000, and short-term. An exit strategy is essential. As for Short Term above, they are designed to ‘fix’ something and then get repaid by either when the property is sold or refinanced once the issue has been resolved.
  5. Asset Finance. Can be used to lend money for multiple reasons, secured by an asset such as a vehicle (car, truck, boat, motorcycle). Terms are up to 5 years, and rates are affordable due to the security available for the Lender. Typically done to consolidate debt, refinance high interest vehicle lending or provide funds to complete a project as above.

Meta Financial Solutions are experienced in all classes of non-bank lending and have excellent relationships with multiple lenders. We are actively seeking to grow our client’s knowledge and usage of them, because too often we see people take a “No” from the bank as a “That means it’s impossible!” and proceed no further with their wealth creation goals.

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This calculator is intended as a guide only and is based on the Residential Owner Occupied rate. It is not intended to provide advice, and is not a quote or an offer of finance by any lender.