When Mainstream Lenders Say ‘NO’, Near Prime Is The Answer
Why you need to get familiar with non-banks and near prime lending.
As a broker, choosing the right lender for your customer’s mortgage can be hard. There are countless factors to consider, such as who has the most responsive BDMs, the fastest turnaround times and ultimately who will get you a ‘yes.’ Usually, you’d stay in your comfort zone and stick with the majors, but with the banks under increasing scrutiny from the Australian Competition and Consumer Commission (ACCC) and the Australian Prudential Regulation Authority (APRA), their lending criteria is becoming tighter by the minute. Consequently, you will be forced to look elsewhere to find a solution for your customers who don’t fit the lending criteria of mainstream lenders. So where do you start?
If you haven’t already, get familiar with non-banks and near prime lending. According to data from the Australian Bureau of Statistics and Deloitte’s Australian Mortgage Report 2017, non-banks account for approximately 10% of the Australian residential mortgage market (which equates to $160 billion AUD). Furthermore, non banks offer solutions to borrowers who have been declined by mainstream lenders due to their automated credit scorecards.
Everyone’s circumstances are different, which means a number of your customers won’t fit the credit scorecards used by mainstream lenders. These borrowers are better suited to a near prime loan if they have complex income (e.g. contractors, short term or casual employment, or those who receive Centrelink payments as a secondary income), are self-employed or those who have some small credit impairment (e.g. defaults or judgements under $1,000). Banks typically find these borrowers ‘risky’ since they don’t fit into their stock standard borrower profile.
In these situations, non-banks are the way to go. Bluestone, in particular, is a great place to start if the banks say no. Specialising in near prime residential lending, we provide flexible home loan solutions to those who fall outside mainstream lending criteria and their scorecard requirements. Unlike banks, when it comes to Alt-Doc loans, we assess income differently from banks by applying a common-sense approach to income verification on a case-by-case basis. We accept three documents for our Alt-Doc products including: 6 months BAS, business bank statements or accountant’s letter (plus 3 months personal bank statements).
Our rates, fees and charges are transparent and publicly available. Bluestone’s rates, fees and charges are readily available in our product matrix. According to the Australian Financial Review (AFR) and the ACCC, there may be a number of hidden fees and charges with the mainstream banks.
As stated in a recent article by Mortgage Professional Australia (MPA), one of the key takeaways from the Royal Commission’s first round of hearings was that banks need to restore their transparency with customers. Therefore, being clear and honest with customers is our priority, since this fosters trust and accountability.
Non-banks have a compelling offering for borrowers in unusual circumstances and should be viewed as an alternative to mainstream lending when they have been declined or rejected by the banks. Bluestone, in particular, is flexible, offers quality service and we are transparent with our rates, fees and charges. More importantly, we provide solutions for your customers when they don’t qualify for a mainstream loan.
Traversing the home loan landscape can be tricky, but we’re here to make the journey easier. So where do you go when mainstream home loan lenders say no? Bluestone. If you’d like to find out more, check out our top niches here or speak to your Bluestone BDM to workshop a scenario.