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Unlocking equity - the rise of the non-banks

Non-bank lenders' popularity is on the rise, as the Reserve Bank pushes more restrictions on banks and the type of lending they can do. If a lender is not registered as a bank, they don't need to abide by the Loan to Value (LVR) restrictions – providing a different option for clients who are struggling to get their investment loan approved by the bank.

Are you wanting to use the equity you have built in your home to purchase an investment property, but can't get the 40% deposit now required by banks? A second-tier lender could be an option for you, whether you are looking at residential or commercial options.

Borrowing from a non-bank lender could be a short term fix until you have a bigger deposit - or even a long term solution for those that have no way of proving their income.

As non-bank lenders tend to have more flexibility in terms of their criteria, they can also be a viable solution for the self-employed.

Going to a second tier lender could also mean more buying power. For instance, if you have a $200,000 deposit and you get a mortgage to buy an investment property with the bank, because they require a 40% deposit you can buy a property of the total value of $500,000. If you go to a non-bank lender with the same deposit you have a buying power of $1,000,000 because you only need a 20% deposit.

Be aware that the flexibility that non-bank lenders provide to investors comes at a cost, as you will pay a premium on your interest rate.

If you are thinking about buying an investment property, but not sure you can use your equity to get a loan from your bank, call us on 0800 500 510 and we will find the right solution for you.