5 Non bank lenders who may say yes if the bank says no

In most cases it’s best to make a loan application at one of 27 registered New Zealand banks first. If you can’t get what you want from the banks (or your mortgage advisor says you won’t be able to) it's time to try second tier or non bank lenders. Borrowers suited to non bank lenders may include people who:

• Have bad credit.

• Are self employed or run a small business. 

• Have irregular income or less than two years’ proof of income. 

• Have a small deposit. 

Non bank pros

• May have more flexible lending criteria and lend to borrowers the bank won’t. 

• More niche or specialised products for investors and other unique borrowers. 

Non bank cons

• May charge higher fees and interest rates.

• Might be less financially secure due to riskier lending. 

• Can’t offer financial products like term deposits, credit cards and savings accounts.

One of the benefits of not being a registered bank is that non-bank lenders are able to be more flexible with their lending. That means borrowers who’ve been denied by the banks may have more luck with a second tier lender.

That includes self employed people with inconsistent income or no proof of income, and those with bad credit scores, or small deposits. Investors may also favour non banks because they’re often able to lend with a higher loan to value ratio (LVR) (meaning a smaller deposit is required) which can enable investors to buy more property. 

Nonbank lenders are able to be more flexible and accept loan applications from riskier borrowers because they are less regulated than registered banks. They are not bound by the same LVRs or debt to income (DTI) restrictions that banks are. 

With that said, they’re still bound by the Credit Contracts and Consumer Finance Act (CCCFA) which requires that lenders ensure borrowers can afford to repay loans and promotes responsible lending. 

Banks usually fund their mortgage lending by taking deposits – because non-banks can't rely on deposits they use other sources to finance their loans. That includes private investors, wholesale markets and more. 

If you’re assessed as a ‘risky borrower’ that might mean you have a low credit score, small deposit, or unstable employment. While banks are likely to outright decline your application, nonbank lenders take a more risk-based approach to lending, and instead accept your application with an increased interest rate. They’re able to do this because they’re much smaller than banks,serve a more niche clientele and can assess applications pragmatically on a case by case basis. 

Generally non bank lenders are going to charge higher interest rates. For example:

• ANZ is offering one year fixed for 6.85% at the time of writing (12/08/2024)

• Resimac, one of the country’s biggest non bank lenders, is offering 7.59% one year fixed. 

Non bank lenders may also charge extra fees. In fact, they generally charge an establishment fee of between $900 and $1,500 and don’t offer cashback like the banks do, according to Opes Partners. 

If the bank has said no, or you’re financing a project that is a little unusual, like a tiny house or a development, then a non bank lender could be perfect for you. Here are a few of the largest non banks in New Zealand:

Avanti Finance was named Opes Partners top non bank lender in New Zealand. They offer a huge range of mortgage products and flexible criteria to suit a range of borrowers, including self employed people and wealthy clients with lots of assets but minimal income. 

Squirrel are a peer to peer lender that offer a bunch of different loan options suited to people who the banks don’t like. For example, they offer a loan specifically for tiny houses, one for first homebuyers with as little as a 5% deposit and one for builders undertaking a one-off residential project or a small scale development. 

First Mortgage Trust is New Zealand’s largest non-bank first mortgage lender. They don’t lend to consumers but they are ideal for investors, property developers and equity releases to purchase a business. They offer loans from $150,000 to $34 million and offer specialist advice for property developers. 

Auckland financial advisory firm, Lateral, named development lender ASAP Finance their number one non-bank in 2024. They noted their incredibly quick drawdown that may be just a few days, their excellent value offering and their expert development knowledge.