Buying your first home in New Zealand can be challenging. Rising house prices and strict lending rules make it hard to save a big enough deposit. Non-bank lenders offer a helpful alternative. They’re more flexible than banks and may work with buyers who have smaller deposits or credit issues. Here’s what you need to know about non-bank lenders in New Zealand.

What are non-bank lenders?

Non-bank lenders are financial institutions that aren’t banks. These include finance companies, credit unions, building societies, and mortgage trusts. They’re also called "second-tier lenders."

Non-bank lenders provide loans like banks, but they follow different rules. Unlike banks, they aren’t restricted by the Reserve Bank’s Loan-to-Value Ratio (LVR) rules. This allows them to be more flexible, particularly for borrowers who:

• Have small deposits (less than 20%).
• Are self-employed with irregular income.
• Have a poor credit history.

Some examples of non-bank lenders in New Zealand include Finbase, Pepper Money, SBS Bank, Liberty, and Unity.

Advantages of non-bank lenders

Non-bank lenders offer flexibility and can often help when banks say no. Here are some other benefits:

• Flexible criteria: They’re often willing to lend to people who don't meet the strict requirements of traditional banks.
• Low deposit options: They work with buyers who have smaller deposits, allowing you to buy a home sooner.
• Short-term solution: Use a non-bank loan to start, then refinance with a bank when your finances improve.
• Fast approvals: Their fast approval process helps in a competitive market.

Disadvantages of non-bank lenders

While non-bank lenders can be a great option for some borrowers, there are a few things to keep in mind:

• Higher interest rates: They may charge higher interest rates than banks.
• Temporary fix: Often these loans are a short term solution, with many borrowers refinancing to a bank later.
• Fewer products: They may not offer the same range of financial products as banks, such as credit cards, savings accounts, and online banking.
• Risk of overborrowing: Their flexible approach can sometimes lead borrowers to take on too much debt.

Making the right choice

Non-bank lenders can often help first home buyers who don’t qualify for a bank loan. Their flexible approach and fast approval process can make a big difference in a competitive housing market.

If a bank won’t lend to you, a non-bank lender could be the key to owning your first home. Speak to a Mortgage Express adviser today. They can review your situation, explain your options, and help you take the next step towards home ownership.