Second tier lenders play an amazingly important part of our financial system here in New Zealand and many people do feel they have plenty to offer New Zealanders.
What are second tier lenders?
Second tier lenders can be a variety of different finance companies or some non bank lenders, who are not ‘banks’. As such, they have an important role to play in helping people borrow money for property in a variety of circumstances that the bank would otherwise not be willing to give someone a loan.
Do they cost more?
Generally speaking second tier lenders have a higher interest rate than a main bank lender, but are often still a great proposition if it makes sense. Sometimes paying a higher interest rate can be the difference between having something and not having something at all, making it an obvious choice.
If a bank declined your application, would you rather pay a bit more but still get a home loan for example, or would you rather keep renting? Renting is often considered ‘dead money’ so getting a home loan is a great idea with a second tier lender in the eyes of many.
How are some ways second tier lenders have held people in the past?
Bad Credit: Many second tier lenders are more willing to help people who have had bad credit in the past. If a person has had defaults or judgements, it can be hard to get a bank to approve their home loan. Fortunately with the help of a second tier lender this could be possible – though depends on the circumstance.
Limited Financials: Some people earn money but do not have the ability to easily prove that income. An example could be a person who works casual hours, or a business owner who has not been in business for a very long time. A second tier lender can possibly help with this.
Other benefits of second tier lenders
Many people have expressed that second tier lenders have done a great job in overall keeping the mortgage market more competitive. With there being more ‘players’ in the market or options to choose from, second tier lenders have helped produce positive competition that has made other players become more competitive in the marketplace.
How to apply for a second tier lender?
Most people wanting to apply with a second tier lender will solicit the help of a mortgage broker or financial adviser to help put together the application. You may be required to provide your personal details, ID, some bank statements, and some other information. The application process is generally less ‘strict’ than a bank, but do remember that second tier lenders have their own set of criteria too and cannot approve just any deal.
If you’re wondering if a second tier lender is an option for you, contact us today for more information.