Second Tier Lenders
Second Tier Lenders could save your home from a mortgagee sale, or get you a new home loan if you have bad credit. They provide a great opportunity to get back on track with the help of a non bank lender.
What are second tier lenders?
2nd Tier Lenders are usually New Zealand companies that provide loans to people who do not normally qualify for a bank loan. They give Kiwis the opportunity to get a home loan, even if they may have bad credit or some other reason why they do not normally qualify for a home loan with a bank. If you have a weak credit score, this can be a good idea too.
Why might you need a second tier lender?
If you haven’t been able to qualify for a home loan with a bank, or have been declined or told you can’t get a home loan or refinance, a second tier lender can be a good option.
- Bad Credit – If you’ve had some trouble paying bills in the past, there is a chance a 2nd tier lender could still approve your loan. 2nd tier lenders are often more receptive and understanding around issues such as if you have had credit problems.
- Issues with Income – If you have inconsistent income, or are a beneficiary, or don’t have a great income, a second tier lender is likely to be more considerate of this, whereas a bank may normally say no.
- Mortgage Arrears – If you have mortgage arrears or have had problems paying some of your other debts, you might be able to get a home loan with a non-bank or second tier lender.
- PLA Notice Or Mortgagee Sale – If you’ve been threatened with the prospect of receiving a Property Law Act notice, a second tier lender might be able to rescue you.
Is it expensive to use a second tier or non bank lender?
We believe the answer to this question is no, and it is a very subjective or relative question. You often have to ask yourself, what is the cost of not getting this home loan with a second tier or non bank lender?
Imagine this; if you own a home right now, and need to refinance out of your current bank to pay your bills, do you have other options? If you’ve been turned down by the banks, what else can you really do? You would otherwise probably be running risk of being in default on your mortgage or have arrears, and then that could cost you thousands of dollars more!
Instead, we believe that using a second tier or non bank lender will give you that all important ‘middle ground’ to safely rebuild your finances without too much stress.
How can a non bank lender help?
A non bank lender could help you get a home loan if you have bad credit or mortgage arrears. They often use different methods to assess your mortgage application compared to banks or first tier lenders. This gives you a real chance at getting a home loan if you’ve been turned away before.
This is of great importance as more and more New Zealanders are finding it hard to pay their debts. A non bank lender or second tier provider could help you have some time to recover financially and get back on your own feet.
How to apply for a non bank lender or second tier lender?
Most non bank lenders or second tier lenders will not directly deal with customers, and will insist you use a mortgage broker. Also, not all mortgage brokers are able to deal with non bank or second tier lenders. It is usually best to talk to a person who specialises in this area.
However the good news is that using a mortgage broker will make the process much easier for you. It can be complicated to use a non bank lender, or confusing to understand their processes and how to meet their criteria. However if you have a good professional mortgage broker guiding you through the non bank lender process, this could save you much stress.
You should tell the mortgage broker if there is any reason for urgency, including if you are potentially falling behind on meeting mortgage payments, need urgent financial assistance, or may be facing the prospect of a mortgagee sale. Giving this all important information upfront will help save the number of questions and surprises down the track. Mortgage Rescue is not a second tier lender, but puts you in touch with an adviser who can arrange one for you.
Example of processes for using second tier lenders
You can expect to provide information to a mortgage broker or financial adviser to help them understand your situation. It is important to provide clear and accurate information. If you provide missing information, or lie, it will make the process much harder and potentially result in you getting declined. Think of the mortgage broker or financial adviser as someone on your side. If you tell them what they need to know, they’ll be able to more confidently assist you though the process.
- Provide information of the situation – E.g. if you have been declined at the banks before, or had trouble with them, can you share the reason why? Did they give you any reasons fo rejection? When did the decline or issues happen?
- Organise supporting documentation – E.g. to apply for a home loan you’ll normally need to provide your driver’s license or passport. If you don’t have these ,you may need to provide an alternative form of ID. You also probably need to provide some of your previous bank statements and payslips.
- Undergo the application process – If you undergo the application process, the mortgage broker or financial adviser may speak to a couple of different lenders about your situation. It may undergo assessment, and you may be asked to provide additional clarification.
- Receive a finance offer or letter of offer – If your home loan is approved, you’ll usually receive a letter of offer, often ‘conditional’ stating a number of conditions that need to be met before you can fully access your home loan. Examples of these conditions could be that you need to organise a valuation, or clarify a few parts of your bank statements. There may be other parts of the process.
- Drawdown on your new loan – If all is in order, loan documents or agreements are sent to you and/or your lawyers. Your lawyer would normally talk you through it and then be able to answer questions. Then the process can be completed and you get your new home loan!
Some second tier lenders could also be more understanding of having issues like unstable employment, a short time being self employed, late payments, having overdrafts, lots of debts, bad credit, or even a caveat on the property. The above list is a rough outline of part of the process, and whilst it doesn’t encompass everything to consider, it gives you some starting idea of what you could expect.