Non-conforming loans
Having trouble getting your act together but still need a loan to buy that perfect house you just saw online, looked at on the weekend and then made an offer – which was accepted…..
Now you are staring down the barrel of a number of deadlines:
– finance clause
-settlement date
-financials and tax returns….
Hang on, I forgot I don’t have any financials for the last two years but my spouse/partner/significant other is working at a normal job so that should work? You go to the bank and when the call centre person stops laughing because you don’t have the same income as the loan you need, you hang up and then depression sinks in..
Welcome to the world of non-conforming lending. This title covers a multitude of sins or opportunities… depending how organised you are.
So what is a non-conforming loan? It’s one that falls outside the square and there are many reasons why loans fall outside the standard box these days.
These include but are not limited to:
Discharged Bankrupts
Unpaid and paid defaults.
Arrears on existing facilities.
Behind in tax liabilities.
Tax returns not due for years, no financials available.
BAS statements only proof of revenue.
These are some of the reasons and when you add them together or maybe even add multiple defaults due to divorce from spouse or business partner, that the dream home gets further and further away.
The good news however, is that there are a number of players in this non-conforming space. That means like all things in the open market there is not only an opportunity to get your loan but there is also competition. Add to that a record low interest rate environment and your rate (will be higher because of the perceived risk) will not be double digits.
These lenders use traffic signal style systems to rate the loans, red for 1 day ABN and 1 day discharged bankrupt, yellow for longer term discharges and not too many arrears discharged for greater than 12 months, and green for everything is good to go.
These lenders are very experienced in this space and believe me, tell them the truth about how you got into trouble, there is not a story they haven’t heard and they see so many of these types of loans. They really don’t care about your problems. They get paid to get loans approved and if they don’t lend then people don’t get paid.
When we have dealt with these in the past, people are understandably shy to talk about what happened and what the problem is. Believe me, with these lenders nothing is too bad. The bottom line for them is what is the security like and can they afford to pay the loan now. You still must have an income but what happened in the past is exactly that – THE PAST. When you hear stories from them about consolidating 40 credit cards (how they got that many I don’t know?) and all sorts of personal loans and tax debts etc, you realise you will struggle to find a worse loan for them.
Some of these lenders are Pepper, LaTrobe Financial, MKM, Bluestone and some other smaller lenders. They are doing well during the royal commission environment and their loan books have been growing monthly as at July 2019.
The items you will need for these lenders is a bit different as they supply some of the documents you need, including but not limited to, is the
Accountants Declaration, to be signed by the accountant and given to the lender. These forms are often hard to get signed by some accountants and the lenders have put in a clause now that states that they (the lender) won’t hold the accountant if something should go wrong.
Applicants Declaration – to be signed by the applicant and will most likely be conferment by the lender.
* 3 to 6 months BAS statements. This is to give an idea of turnover.
* Copies of all the statements that are going to be refinanced if that’s the purpose.
* ID’s and a copy of the purchase contract.
Remember it doesn’t matter how bad you think it is you are, I can guarantee that they have seen much much worse.
One thing we need to note though is that the absolute most you can get is 90% of the purchase price and even then, 80% might only be the max, work on an 80% lend and anything higher ratio wise is a bonus.
If you would like to talk to us about applying for loans, please contact us on 1300 840 411.