Deciding where to go for your home loan is one of the most important decisions you’ll make. While many prospective property owners will choose to use a mainstream lender, non-bank lenders also have their advantages.
What are non-bank lenders?
Essentially, a non-bank lender is a lender that’s not a bank, credit union or building society. It has its own source of funds, which it lends out with a margin for profit.
A non-bank lender may also be a company or individual who borrows money from a bank at wholesale rates and then lends the money with a profit margin added.
We worth with both banks and non-bank lenders.
Potential benefits of a non-bank lender
There are several benefits associated with taking out your home loan through a non-bank lender, including:
1) Lower overheads, generally meaning lower fees
Non-bank lenders usually have smaller overheads, because they have fewer offices and fewer expenses when it comes to marketing and labour. This should lead to lower fees and better rates.
2) Can be better on investment loan rates
The Main Australian banks take deposits, which makes them bound by certain rules (ADI rules set by APRA). These rules keep bank deposits safe.
But, Non-bank lenders do not take deposits - they usually borrow money from an investment market at 'wholesale rates' and then lend the money with a profit margin added, so they don't have that layer of red tape to deal with.
Because of this, they can be more flexible on investment loan rates and non-bank lenders often have the best deals in the market for investment property loans.
Non bank institutions still make sure the loans are safe, to ensure they are stable companies. They are still regulated by the Australian financial regulations too.
3) Customer service
Non-bank lenders try to offer a more personalised service because they tend to have a smaller database. It’s likely that you’ll be given more attention right through your home loan process, even after you’ve signed on the dotted line. Also, while you sometimes might deal with multiple people at a bigger bank, with non-bank lenders it’s more likely that you’ll be dealing with one person from the beginning.
Non bank lenders still have the following:
- Internet banking services so you can transfer money easily
- Features such as redraws and offsets on the account
- Phone based service
- And of course, we can help you directly with lender, post settlement, to help you get any changes made (for example, if you wanted a top-up, to refinance, or to change payment frequencies)
4) Approvals: time and ability to think outside of the box
Sometimes it can take a while to get a home loan approved by a big bank. With a smaller, non-bank lender, you may be approved more quickly because you’re potentially talking to the loan decision-maker.
Smaller lenders rely more on human decision-makers when assessing loans, whereas main banks are often more 'computer driven' in their approvals.
This can include:
- Clients with credit defaults and bankruptcies in the past
- Clients who are new to Australia or on different Visa categories, or who reside overseas
- Clients who need flexibility in the length or terms of the loan
- Clients who are self employed and have limited financials or trading history
5) Range of choice.
Given the range of non-bank lenders out there, you have a decent chance of finding one that suits your particular needs and circumstances. Go with what works for you
There are pros and cons for both big banks and non-bank lenders, so finding the right lender for you is what’s most important.
You’ll be the one making the repayments, so you need to be happy with the rates, service and fees that are offered.
As an accredited mortgage broking service with over 35 lenders to choose from, we are an ideal go-to company to discuss your situation and what might be right for you.
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HOW WE SUPPORT CLIENTS
At Profy Finance and Wealth, we have supported business and clients who are looking to finance property, investments, homes, vehicles and businesses, through:
- Providing pre-approval reports with your buying power, including any LVR and LMI considerations
- Arranging valuation reports to guide you on potential offer prices
- Calculating and recommending finance options
- Arranging fully approved finance
- Arranging value add services such as building and contents insurance, depreciation reports, and legal conveyancing at preferred prices.
At Profy Finance and Wealth, we get more holistic results for our clients. Learn more about how we could help...