Most of my clients are well looked after by the main banks. But some situations call for a different kind of lender. Maybe the property needs work, the deal has a tight deadline, or your plan doesn't fit neatly into a standard box.
That's where non-bank lenders shine. They offer flexible, practical solutions that help you secure an opportunity and keep moving forward.
In this post I'll explain what non-bank lending is, share four real client stories, and cover how to use it well.
What is a non-bank lender?
A non-bank lender is a finance company that lends money for property, but isn't one of the main banks. In New Zealand, that means lenders outside the five main banks.
The main banks are a great fit for most people. They work to set criteria around income, servicing, and the type and condition of the property.
Non-bank lenders add another set of options. They tend to look at the whole picture: the property, your equity, and most importantly, your plan. They can also move quickly, which matters when a deal has a deadline.
Four real situations where non-bank lending was the right fit
These are real clients we've worked with. Names and details have been left out.
1. The fixer-upper that wouldn't wait
An investor found a property well below its potential value. The catch? It needed a lot of renovation, so it didn't meet main bank criteria. The vendor also wanted a quick settlement.
A non-bank lender was comfortable lending on the property as it stood, and approved it fast. Our client bought it, did the renovation, and we then refinanced the loan back to a main bank at a better rate.
2. A commercial unit the banks wouldn't fund
These clients wanted to buy a small commercial unit. We funded their deposit with a top-up on their home loan. The unit itself sat outside standard bank criteria, so a specialist lender was the better fit.
We split the deal. The deposit came from the residential top-up, and the commercial loan went to a non-bank lender who looked at the bigger picture.
3. Finishing the build while the section sold
These clients were partway through building their home. The plan was to sell a separate section to fund the rest of the build. Then the market slowed and the section didn't sell in time.
Rather than stretch their weekly budget, we found a solution built for this situation. A non-bank lender offered a short-term loan with the interest fully capitalised. That means the interest was added to the loan, not paid each month. Our clients finished the build, sold the section, and repaid the loan in full.
4. A bridge to settlement
These buyers had gone unconditional on a home and needed funding in place for settlement. Their circumstances meant they needed a bit of time to get their finances in shape first.
A non-bank lender stepped in so they could settle on time. That gave them breathing room to sort their finances, with a plan to move to a main bank down the track.
Using non-bank lending well
Non-bank lending works best when it's used with a clear purpose. Here's what to keep in mind.
It costs more. Interest rates and fees are usually higher than at a main bank. You're paying for flexibility and speed.
It's usually short term. Many non-bank loans run for months or a few years, not 30 years.
You need an exit plan. This is the big one. In every story above, the client knew how they'd get out. That might be refinancing to a main bank, selling a property, or improving their income or credit over time.
Used the right way, non-bank lending is a bridge to where you want to be. It shouldn't be a place you get stuck.
Talk to an adviser early
The earlier we talk, the more options you have. Ideally, before you make an offer.
As an adviser, I work with 24+ lenders, including the main banks and a range of non-bank lenders. That means I can look at your situation, find the right fit, and help you plan your path back to a main bank if that's the goal.
If you've got an opportunity that doesn't quite fit the standard mould, get in touch. Let's find the right solution together.
Book a call with Adam here to learn more:
https://www.mymortgage.co.nz/call-with-adam/
