One of the biggest issues facing both investors and home buyers over the past year or so has been the tightening of lending requirements by the Banks, particularly in response to moves by the Australian Prudential Regulation Authority (APRA), and the public scrutiny generated by the Banking Royal Commission.
In a tight lending market like this, it is important to remember that the Banks are not the only source of finance when purchasing a property. Indeed, an increasing number of home buyers and investors have been considering alternative sources of funding, a group often referred to as non-bank lenders.
What are non-bank lenders?
Readers with long memories may recall a time when the only way to get a home loan was to have a solid savings history with one of the big banks. Over time, banking deregulation saw several smaller banks enter the market, along with credit unions, building societies and other forms of limited banking-style services. These are generally known as ‘authorised deposit-taking institutions’ and are still regulated quite heavily in Australia.
More recently, we have seen a number of non-bank lenders entering the home loan market offering interest rates that are often under those of the banks. One well known example of these newer players is Aussie Home Loans. These businesses are home loan providers who are not authorised to accept deposits from customers. They have their own sources of funding, and many would say that have added some much-needed competition to Australia’s mortgage market.
Are non-bank lenders safe?
In past decades, non-bank lenders were often viewed as a last resort for borrowers with less than ideal credit histories, but this perception has certainly changed in recent years.
Today non-bank lenders are generally considered to be secure financial institutions, and are required to comply with similar consumer credit rules and regulations as the banks. What’s more, many of them offer a range of products and interest rates that are more than competitive with the big banks.
Alternative sources of housing finance like non-bank lenders are one more reason that our team at Ian Reid’s Vendor Advocates recommend using an independent Mortgage Broker to help you source the best home loan deals available. A good broker will often help you find a loan that not only saves you interest, but which also offers specific features that suit your individual requirements, be it an offset account, the ability to make extra repayments, or even to reduce repayments if you have a change of circumstances.
In addition, a mortgage broker will be there to provide guidance and assistance during the loan application process, from the initial application through to approval and settlement day…a bit like one of our Advocates when you’re selling.
If you are looking for the right home loan as part of a plan to sell and move on, don’t forget that our free booklet, Fatal Real Estate Traps Exposed, could save you a great deal of time, money and stress during the sales process. So why not download a copy while you’re here?