Not so long ago, anyone considered “credit impaired” or non-conforming was unlikely to gain home finance easily.
Most lenders preferred traditional borrowers – those with a regular income from the same employer for a number of years, with no history of defaulting on debts or bankruptcy.
For those who didn’t conform – casual or self-employed workers, full-time property investors, new immigrants and retirees – gaining finance was often difficult and time consuming.
Luckily times have changed.
Exceptions to the rule
Today, lenders face to an ever-changing work force and more complex patterns of employment and home-ownership. Casual and part-time workers now make up a significant portion of the work force.
These trends are matched by changes in the home finance market. According to the Reserve Bank of Australia (RBA), non-conforming loans are estimated to account for up to 4 per cent of the value of new housing loans. The non-conforming market is expected to continue to grow steadily in line with international trends.
Lo-doc loans
Increased competition among lenders and growth in the non-conformng market has led to new generation of loans specifically tailored to non-conforming and in some cases, credit-impaired borrowers. The National Australia Bank and ANZ have both recently launched new lo-doc loan products.
Lo-doc loans allow self-certification of income and are designed for self-employed borrowers who may not have easy access to financial documentation such as payslips, income records and group certificates.
Increasing options
Because non-conforming borrowers are considered higher risk, applicable loans often have a higher interest rate or a lower loan-to-value ratio, and require the borrower to take out lender’s mortgage insurance.
For credit-impaired borrowers, the lender can make an assessment and price the loan according to the level of risk they perceive.
However, some non-conforming lenders will reduce the interest rate for those borrowers who have had an unblemished repayment record for a specified period. Overall, with major banks assessing loan applications on a less standardised basis than in the past there are more competitive loan options for non-conforming borrowers than ever before.
If you have any questions please feel free to contact us – Obligation free.
Most lenders preferred traditional borrowers – those with a regular income from the same employer for a number of years, with no history of defaulting on debts or bankruptcy.
For those who didn’t conform – casual or self-employed workers, full-time property investors, new immigrants and retirees – gaining finance was often difficult and time consuming.
Luckily times have changed.
Exceptions to the rule
Today, lenders face to an ever-changing work force and more complex patterns of employment and home-ownership. Casual and part-time workers now make up a significant portion of the work force.
These trends are matched by changes in the home finance market. According to the Reserve Bank of Australia (RBA), non-conforming loans are estimated to account for up to 4 per cent of the value of new housing loans. The non-conforming market is expected to continue to grow steadily in line with international trends.
Lo-doc loans
Increased competition among lenders and growth in the non-conformng market has led to new generation of loans specifically tailored to non-conforming and in some cases, credit-impaired borrowers. The National Australia Bank and ANZ have both recently launched new lo-doc loan products.
Lo-doc loans allow self-certification of income and are designed for self-employed borrowers who may not have easy access to financial documentation such as payslips, income records and group certificates.
Increasing options
Because non-conforming borrowers are considered higher risk, applicable loans often have a higher interest rate or a lower loan-to-value ratio, and require the borrower to take out lender’s mortgage insurance.
For credit-impaired borrowers, the lender can make an assessment and price the loan according to the level of risk they perceive.
However, some non-conforming lenders will reduce the interest rate for those borrowers who have had an unblemished repayment record for a specified period. Overall, with major banks assessing loan applications on a less standardised basis than in the past there are more competitive loan options for non-conforming borrowers than ever before.
If you have any questions please feel free to contact us – Obligation free.
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