As a mortgage broker that specialises in non bank finance I get approached from people throughout New Zealand.
Sometimes the people will contact me after being turned down by their bank or after having no success with a local mortgage broker, but also many people realise that their situation may be difficult and know that they need an expert to help them secure the best home loan.
The Previously Bankrupt Couple From The Bay Of Plenty
I was recently contacted by a couple from the Bay of Plenty.
They knew that their situation was not straightforward as they had been bankrupt and although they were discharged in 2017 their credit score was showing as nil and the bankruptcy was still showing on their credit check. They had spoken to their bank and been told “NO” and so spoke to a local mortgage broker who had suggested a lender that may provide the finance at an interest rate of 8.71%.
Like many Kiwis they then decided to search the internet to see what other options they had, and through this research they ended up phoning me.
We had a good conversation and I got an understanding of what caused the bankruptcy, of their current situation and of course what they were wanting to do. From this I could immediately offer then some advice and we decided to proceed with a home loan application.
In summary;
- They were wanting to purchase a house for $415,000
- This couple had a good deposit of $115,000
- They both had good incomes
- But they had the bankruptcy showing on their credit checks – discharged in 2017
Apart from the bankruptcy this looked like a good deal for a bank, but unfortunately the banks don’t see it this way.
Home Loan Success For Previously Bankrupt Couple
The main issue for this couple was the previous bankruptcy and so we needed to deal with this.
We had a good conversation and I got an understanding of what caused the bankruptcy and then had the couple draft a letter covering off the major points so I could include this within the application which I was to present to the lenders.
With this couple’s situation I knew that I could get the finance with one of the non bank lenders that we used, but I also was fairly confident that I could get one bank to accept it too.
The major banks are not interested in these types of applications, but one of the New Zealand banks has a specific home loan designed for people that have had a previous credit issue. There are some strict criteria and the application needs to be presented correctly; however it is a good option for people like our Bay of Plenty couple.
The home loan application was presented and approved!
The home loan was approved with a bank loan from The Co-Operative Bank using their specialised Fresh Start Home Loan.
The interest rate for the Fresh Start Home Loan is higher than the banks standard loans with a 2.00% margin added, meaning the 12-month fixed rate was 6.05% (special rate of 4.05% + 2.00% margin) and at the end of the 12-months with good account conduct the margin is removed so they are back to standard bank interest rates.
How does this compare?
- Firstly as this finance was arranged with a bank our clients save on the fees that non-bank lenders charge.
- In the first year our clients will save $7,980 in what they would have paid in interest (difference of 2.66% between 8.71% and 6.05%)
- In the second year and every year after that our clients will save $13,980 in what they would have paid in interest (difference of 4.66% between 8.71% and 4.05%)
Note: these figures may change over time as the loan gets paid off, but are used to demonstrate the point.
This was a great result – a real success!
Another reason to speak with a non bank broker.
