The revised mortgage rate in New Zealand has unexpectedly hit everyone. It is hard enough to find a home that you want to buy and sum up enough capital to make the down payment and this new hike has just made it worse! If you are looking to invest in a house, there is no time better than now. The market is at its benevolent best and any investment made will only guarantee favorable returns. Procuring a loan from a bank is a herculean task and very tiring. Banks can be uncooperative with their inflexible laws and rules. It would be a refreshing change to have a lender who could bend and make exceptions. There are other non bank options that you may consider.
Bank giving you the thumbs down?
As per a recent survey conducted over 30% of mortgage applications are rejected each year by banks. The crash of the housing market has further tightened the lending laws. Mortgages can be widely classified into four groups: Revolving credit facility, Table mortgage, Reducing mortgage and Interest only mortgage.
The top reasons that have been unanimously listed by most banks as the basis of rejection of the application are:
Credit issues: most customers have low or poor credit scores. The FICO score cut off falls between 620 and 660 depending on the borrower and lender. Even if the credit score falls within this range other factors like late payment of previous mortgages, bankruptcy in the last 2 years or foreclosure would have a negative impact on the application.
Income issues and knotty money matters: Most failed applicants have an income too low to qualify for a mortgage. A rise in job switches from their line of work to free lancing is the main cause of mortgage rejection.
Condition problems: Bad condition of the property results in lower appraisal and in turn leads to slimmer chances of acceptance of the mortgage application. Broken windows, cracked ceiling and leaky roofs reduce the value of the property. If you are looking at condos belonging to a homeowners association, if 25% of the condos are rented out (non-owner occupancy) and over 15% have outstanding dues on HOA payments, refinance and mortgage is likely to be rejected.
Non bank lender is the friend indeed
Non bank lenders as the name suggests are not banks or co-operative societies, they do not have a bank license. However, like banks they adhere to the same rules and regulations that supervise all credit transactions.
Non bank lenders are like a safety net that catches those who get rejected by banks. The applicants can approach them with the hope of having their application sanctioned. They have increased competition and offer a larger spread of loan products. Self employed borrowers who are usually dismissed for being high risk can take maximum advantage of non bank lenders’ relaxed clauses. Same applies to those with poor credit score or low incomes.
Unlike banks, non bank lenders are cheaper and offer competitive rates. They have flexible criteria and rules. Most of these establishments are small and thus provide more personalized customer services. They also offer quicker change over on loan applications. The ongoing costs and set up is usually low. Meetings can be schedules according to the applicant’s convenience and needs. In most cases, the customers interact directly with the lenders. The unnecessary expense of broker commission is thus saved.
Non bank lenders are a favorable alternative to banks. By being a genuine customer benefactor, they are gradually giving power and money back to the people.
Take the call
Once the decision of bank v/s non bank lender is made, another important choice of ‘to hire or not to hire’ a mortgage broker become vexing. Mortgage brokers are hired professionals who seek the best mortgage lenders with lowest income rates. Once a suitable lender is shortlisted, they file and supervise the paper work. You can either hire the broker on your own or employ the one at the lender’s end. Few believe that mortgage broker’s self gain triumphs over customer’s benefit. It is believed that each broker has their favorite lender panel and do not find the need to seek other low interest rate offering competitors.
Make the right call and we assure you that you will be presented with nothing but the best offers!