One of the big reasons to use mortgage advisers, rather than go direct-to-lender, is because they give you more choice. And one big way in which advisers offer more choice is by including non-bank lending institutions on their home loan panel.

As the name suggests, non-bank lending institutions do offer loans but don’t have a banking licence. They operate in niches that mainstream banks prefer to avoid. That can include serving borrowers who:

• Are self-employed
• Have bad credit histories
• Have been rejected by other lenders
• Want to consolidate multiple debts into their home loan

Non-banks tend to be much more flexible with their lending criteria: they tend to assess loan applications with an open mind, rather than hard-and-fast rules.

Another difference is that non-banks tend to charge higher interest rates than banks. While that might sound bad, a higher-rate loan for which you can qualify is generally better than a lower-rate loan for which you can’t.

Why non-banks generally charge higher rates

Both non-banks and banks secure funding (i.e. big pots of money) that they then on-sell to consumers. The reason non-bank lending institutions tend to charge higher interest rates is because they aren’t able to secure funding as cheaply.

Many non-banks aren’t able to accept deposits, which means they can’t tap into that cheap source of funding.

Instead, they tend to borrow money from mainstream banks – and banks obviously add a margin on top of whatever it cost them to acquire that funding in the first place.

If you want to get a home loan and your scenario falls outside the norm, a non-bank might be a great solution. Get in touch so I can assess your situation and recommend how to proceed.