Top 5 non-bank lenders in New Zealand

Can’t get a mortgage from the bank? A non-bank lender might be able to help.

Non-banks are businesses that provide home loans to borrowers who might not get approved by a bank.

In the past, some people have had the perception they are “dodgy” or “second-rate.” But they are legal, regulated and run by finance experts.

If you’ve recently been declined a mortgage you may like to think about using a non-bank. This article will break down our top 5 picks.

Just remember the interest rates and fees a non-bank charges are based on the strength of your application.

So, the rates mentioned here will give you an idea of what you might pay. But you may pay more or less based on how strong your application is and the risk you pose to the non-bank.

More from Opes Partners:

• Second-tier lenders vs bank - Which one am I better off with?
• The bank said no...bought a house anyway - Non-bank lender case studies
  
• Non-bank lender exit strategies: How to move from a non-bank to a main bank?
  

#1 Avanti Finance

We’ll start with Avanti Finance. It’s the second-largest non-bank lender in NZ (2022 Financial Institutions Performance Survey).

It also won the best non-bank in New Zealand in 2022 and 2023 at the New Zealand Mortgage Awards.

Avanti has several mortgage types and offers that suit a range of borrowers.

Its prime product (loan) is suited to good quality borrowers who don’t quite fit bank criteria.

The interest rate is competitive and they lend money for up to 30 years, with some interest-only.

They then have specialist loans that suit:

• People who are self-employed where their income is more variable or
• Self-employed people who haven’t been in business very long
• Or wealthy clients who may have lots of assets, but not much income.

They also offer bridging finance. This is a short-term loan where you want to buy a house, but you still haven’t sold your own home.

Avanti Finance also lend to people who have bad credit history, but that rate is slightly higher. Lastly, they can also do personal loans or caveat lending.

So, when it comes to the range of different loans … Avanti comes out on top.

Avanti Finance’s interest rates can range from 9.15% to 10.60% for long-term property loans. Interest rates for shorter-term loans are anywhere from 12.20% to 21.20%.

The type of rate you get does depend on you, and your credit history.

Unlike banks, there are often two parts to your interest rate:

1. a floating interest rate
2. and a margin

For example, you might pay a 9.15% floating interest rate. But then if you pose more risk to the bank, they’ll add a margin on top.

As with any other non-bank, extra fees do apply. You’re looking at a $485 establishment fee if they approve the loan, and monthly fees of $9.85.

#2 Squirrel money

Squirrel Money is a non-bank lender started out of Squirrel (the mortgage brokers), who also feature on our Top 10 Mortgage Brokers list.

One of their loans is specifically designed for first-home buyers – Squirrel Launchpad. This loan will let some borrowers buy a house with as little as 5% deposit.

But these will only be approved for borrowers with a strong income. That’s so Squirrel knows you can afford the higher loan repayments.

These types of loans are “two-tiered”. That’s where Squirrel will organise for another lender to lend you the first 80% of the money at a lower interest rate.

They’ll then lend you the extra 15% at 9.95%, which they make you pay off in 5 years.

Obviously, the higher interest rate means you pay a bit more, but the benefit is you get into your home more quickly.

But that’s not the only loan type they have. They also have loans that suit people looking at:

• Tiny house loans (this is very unique. Most banks won’t fund these)
• Small-scale developments
• One-off residential builds

As with every non-bank, Squirrel Money charges an establishment fee. This is added onto the loan in advance.

The price varies depending on the type of loan you sign for. For example, a home loan establishment fee is $950, but a first-home loan is $1000.

#3 Basecorp

Basecorp are unique. You can get a loan for as little as just 1 month or up to 30 years.

This is why a lot of flippers use Basecorp. These are investors who buy a property, renovate, then sell quickly.

Generally, main banks don’t like to lend to people who flip properties.

For starters, it takes a fair bit of work for a bank to approve your mortgage. They then make their money back over 30-odd years, charging you interest.

So, if you buy and sell a property within a few months, the bank doesn’t make a lot of money.

That’s where Basecorp comes in. But their interest rates are higher the shorter your loan is. Their rates range from 11.95% to 13.95%.

On top of high interest rates, their establishment fees are between $595 and $995.

There are also other fees involved to, such as a monthly admin fee of $13.

#4 Pepper money

Pepper Money is fast. In some instances they will give you an answer within 24-48 hours. So they work well for borrowers who need a quick answer.

Pepper Money also works well for self-employed people. All applications work off only the last six months of income, rather than 2 years (like banks).

They also have an “alternative documentation” option. “Alt doc” means you can apply for loans using non-standard income documents. This means if you earn commission, bonuses, or variable income, it may be easier to get a loan from Pepper Money.

Pepper also considers other loan payments at face value.

Let’s say you have a mortgage that’s fixed on a 5% interest rate. When you go to a normal bank, they will run their numbers as if you’re paying a 9% rate. That’s to see if you could still afford the loan if interest rates spike.

But Pepper doesn’t do that. They’ll run their assessment based on a 5% interest rate (what you’re actually paying). That sounds small but is massive for investors who have a couple of mortgages at different banks.

If you’re paying interest-only on your lending with other banks, they’ll take that into account,

whereas a bank would test all that lending on principal and interest and at a higher interest rate.

Pepper Money charges $1499 for its establishment fee. There is also a $10 monthly administration fee.

#5 Liberty finance

Last on our list is Liberty Finance.

Liberty is an Australian-owned non-bank lender. It’s smaller compared to its competitors.

If you are prepared to take on some higher interest rates, Liberty has options for self-employed borrowers or first-home buyers.

Let’s explain how that works.

For self-employed borrowers, there is the “low doc” (no documents) loan. This means you you don’t need to provide as much proof of your income when you apply.

You can also “self certify” your income. That means you can tell the lender what you earn, without needing to prove it. This makes it a great option for self-employed borrowers, or people who earn income a bit differently.

What’s the catch? The starting interest rate is over 10%. Way higher.

Yes, this is expensive, but after 6 months of making payments the rate drops to the prime rate for good behaviour. So, if you pay all your payments on time, every time, for the first 6 months you get the cheaper interest rate.

First-home buyers can also get approved with only a 10% deposit using Prime Boost. This offers a similar type of loan to Squirrel Launchpad.

This means 80% of your loan term is on their prime rates of 8.59% fixed. But the remaining 10% is on a higher rate, currently 15.49%, which you need to pay off over 7 years.

Again, yes, this is a higher cost, but if you are in a position to get that 10% paid off quickly, it might be worth it to get into your first home.

How is a Non-Bank Lender Different from a Bank?

Banks and non-banks will lend you money to buy a residential property. That could be for you to live or as an investment, but there are key differences.

Non-banks don’t do credit cards, term deposits or other “bank-type” products. They just do home loans.

Because they’re smaller, non-banks have different mortgage structures and interest rates.

Their approach is also different. They take more of a risk-based approach. If you pose more risk, you get charged a higher interest rate.

For a more detailed look at non-banks visit our article: Non-Bank Lender vs Bank – Which One Am I Better Off With?

So which one should I use?

These 5 non-banks are just a sample of the options for home buyers out there.

There are many more, each offering different loan types to suit different situations.

Sometimes getting a more expensive loan is better than getting no loan at all.

The main takeaway here is that there may be genuine options available to you.

A “no” from the bank no longer means “game over”.

So, if you’re self-employed speak to a mortgage broker about whether non-bank might best suit you. If you’re looking for one, you might like to use my team at Opes Mortgages.

A “no” from the bank no longer means game over.

So, if you’re self-employed, a first home buyer, or if you don’t fit the tidy boxes set by the bank – then speak to a mortgage broker about which non-bank might be the best suit for you.

A mortgage broker will advise on which of these lenders best fits your situation, and which products will work for you. If you need a recommendation for a good mortgage broker, check out our list of the top 10 mortgage brokers in New Zealand.