Non-Conforming Loans
Non-conforming loans are available to borrowers who do not meet traditional lending
criteria. These borrowers include self-employed people, contract or seasonal workers,
the credit-impaired and senior citizens. These types of loans are usually offered
by specialty lenders such as Pepper Home Loans, Liberty Financial and Bluestone.
Advantages of Non-Conforming Loans
- These loan products allow non-conforming borrowers to get their foot in the property
market under a set of criteria established by assessing their individual situation.
- Non-conforming loans provide borrowers the means to achieve their objective to buy
a home, purchase or expand a business, or make an investment, where they do not
qualify for a loan from a traditional lender.
Considerations - Non-Conforming Loans
- Specialty lenders calculate your interest rate based on a ‘rate for risk’ model.
This is the balance between how much risk the lender takes in giving a non-conforming
borrower a mortgage. The interest rate is a fair reflection of the borrower’s situation
and the risk involved in lending them large amounts of funding.
- Essentially, the higher the perceived risk that you may fail to repay the loan,
the higher the rate of interest you will be charged. You may also be charged higher
fees and the loan may be inflexible when it comes to refinancing.
Any borrowers with an impaired credit history would need to apply for a non-conforming
loan.
Example of a Non - Conforming Loan
- Liberty Financial won the Best Home Loan for the Credit-Impaired
in the 2007 Your Mortgage ‘Mortgage of the Year’ Awards, with their ‘Nova Home Loan
3-year Fixed’ product.