Second tier loans increasingly popular with first home buyers

by Ksenia Stepanova20 Jun 2018

More and more first-home buyers are turning to second-tier lending after being turned away by their banks, but many are unaware of their options when it comes to securing a deposit.

Century 21 general manager Julius Capilitan says the realty company has been getting referrals from offices as far as Mangakino to the main cities, and has been working closely with first-home buyers as well as property investors and developers to secure financing.

“Often first-home buyers get rejected by banks because they don’t quite meet the servicing requirements, they might not have the right deposit, or a lender does not want to approve the security on a particular property,” says Capilitan. “This gives rise to a strong market for non-bank lenders, and there’s real value in being able to work with clients and getting them the best solution.”

Capilitan says advising clients should include informing them about KiwiSaver HomeStart grants that they may be eligible for – something many first-home buyers still know little about. The government initiative provides two different types of grants for existing homes and new builds, which helps New Zealanders secure the necessary deposit to purchase a home.

“The government is encouraging more new builds, but at the same time, the banks are also tightening their criteria for lending,” Capilitan explains. “They’ve been pushing things like the HomeStart grant and using KiwiSaver savings to provide a deposit, but they’ve also been getting a lot tougher on developers.”

“The other issue with new builds is that the purchase price doesn’t always marry up to the valuation once the build is complete, which leads to complications,” he continues. “This is really where the value of a mortgage adviser comes in to play as they can support you through a situation where a bank refuses to provide a loan. Second-tier lending is rarely a permanent solution, but it is a good interim fix until you can get back into bank lending. ”

Century 21 is now aiming to grow with its clients, lock in their first properties and continue to assist them with future investments, according to national manager Geoff Barnett.

“We’re all about helping Kiwis buy and sell homes, and so having access to great lending deals and advice only adds to our reputation,” says Barnett.


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