If you’ve tarnished your credit history, are self–employed or don’t meet traditional lending criteria; a non-conforming home loan may be an option.
This type of home loan is either offered by a non–conforming lender or a non-conforming mortgage broker. Both specialise in lending money to individuals who deviate from the usual circumstances.
These specialist lenders and brokers exist so that you can get back on your feet and rebuild your credit history, develop a credit rating or take out a home loan when you appear more risky.
Non–conforming home loans are the same as other home loans in many ways. They come in a variety of rate types, such as variable, fixed or split, and as with traditional home loans, you can select from a range of features, such as line of credit, redraw and offset.
Who can they assist?
Those who turn to non–conforming lenders and mortgage brokers usually fall into one or more of the following categories:
- self–employed workers
- part–time workers
- those with a poor credit history
- contractors or seasonal workers
- those who have previously declared bankruptcy
- someone with a new business or job
- new migrants with no records of their credit history
- someone with substantial debt or tax debt
- someone who has been refused credit in the past
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The differences between traditional and non–conforming
The major difference between non–conforming home loans and traditional home loans are the fees associated with establishing and exiting the loan.
These fees are usually much higher than a traditional home loan, as are the interest rates that are offered. For instance, if a traditional lender is offering a rate of 3.47% then a non–conforming lender may be 1% to 2% higher, possibly more. The interest rate offered depends on the severity of the risk.
In addition, non–conforming lenders may be less flexible when it comes to refinancing your home loan. Therefore, before taking out a home loan with a non-conforming lender, it’s important to read the terms and conditions to know any hidden fees and charges that might be written into your loan.
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Short term option
For many, once their credit rating is back on track after a few years of consistent repayments to a non–conforming lender, they will move to a traditional lender.
By refinancing with a traditional lender, borrowers might be able to secure better rates and fees.
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The non–conforming home loan industry in Australia has been steadily growing for a while now.
Investors are increasingly tapping into this sector, given its higher yields over the last decade and its relatively stable performance from 2008 to 2019.
In Australia there are a number of non–conforming lenders who offer a range of home loan products, the leading lenders are Liberty, GE, Bluestone and Pepper.
Non–conforming mortgage brokers at eChoice can offer you home loan products from the following lenders:
- Victorian Mortgage Group
- Liberty Financial
Think a non–conforming lender is the right route for you? Contact a mortgage broker at eChoice for some tailored advice on what to do next.