• Home
  • Services
    • Guarantor Loans
    • Debt Consolidation
    • Home Loan Redraw and Cash Out
    • Home Loan Refinancing
    • LMI Waiver for Financial Professionals
    • LMI Waiver for Health and Medical Professionals
    • LMI Waiver for Legal Professionals
    • Mortgages for Doctors
  • Calculators
    • Borrowing Power Calculator
    • Extra Repayment Calculator
    • Home Loan Offset Calculator
    • How Long To Repay Calculator
    • Income Annualisation Calculator
    • Income Tax Calculator
    • Interest-Only Mortgage Calculator
    • Loan Repayment Calculator
    • Lump Sum Repayment Calculator
    • Mortgage Switching Calculator
    • Split Loan Calculator
    • Stamp Duty Calculator
Menu
  • Home
  • Services
    • Guarantor Loans
    • Debt Consolidation
    • Home Loan Redraw and Cash Out
    • Home Loan Refinancing
    • LMI Waiver for Financial Professionals
    • LMI Waiver for Health and Medical Professionals
    • LMI Waiver for Legal Professionals
    • Mortgages for Doctors
  • Calculators
    • Borrowing Power Calculator
    • Extra Repayment Calculator
    • Home Loan Offset Calculator
    • How Long To Repay Calculator
    • Income Annualisation Calculator
    • Income Tax Calculator
    • Interest-Only Mortgage Calculator
    • Loan Repayment Calculator
    • Lump Sum Repayment Calculator
    • Mortgage Switching Calculator
    • Split Loan Calculator
    • Stamp Duty Calculator
the mortgage agency logo
  • About
  • Blog
  • Contact
Menu
  • About
  • Blog
  • Contact
the mortgage agency logo
  • About
  • Calculators
    • Borrowing Power Calculator
    • Extra Repayment Calculator
    • Home Loan Offset Calculator
    • How Long To Repay Calculator
    • Income Annualisation Calculator
    • Income Tax Calculator
    • Interest-Only Mortgage Calculator
    • Loan Repayment Calculator
    • Lump Sum Repayment Calculator
    • Mortgage Switching Calculator
    • Split Loan Calculator
    • Stamp Duty Calculator
  • Contact
  • Services
    • Home Loan Refinancing
    • LMI Waiver for Financial Professionals
    • LMI Waiver for Health and Medical Professionals
    • LMI Waiver for Legal Professionals
    • Mortgages for Doctors
  • Blog
Menu
  • About
  • Calculators
    • Borrowing Power Calculator
    • Extra Repayment Calculator
    • Home Loan Offset Calculator
    • How Long To Repay Calculator
    • Income Annualisation Calculator
    • Income Tax Calculator
    • Interest-Only Mortgage Calculator
    • Loan Repayment Calculator
    • Lump Sum Repayment Calculator
    • Mortgage Switching Calculator
    • Split Loan Calculator
    • Stamp Duty Calculator
  • Contact
  • Services
    • Home Loan Refinancing
    • LMI Waiver for Financial Professionals
    • LMI Waiver for Health and Medical Professionals
    • LMI Waiver for Legal Professionals
    • Mortgages for Doctors
  • Blog
  • Book in your Free discovery session now!
Non-Conforming Loans
/
non conforming loans
/
July 28, 2021

What Are Non-Conforming Loans?

Tony Xia
non conforming loans

SHARE

Non-conforming loans offer an alternative to traditional loans from standard banks. 

They are geared towards people who would otherwise be unable to receive financing from traditional banks.

If you find yourself unsure whether you will meet the criteria to have your home loan approved, a non-conforming loan might be suitable for you.

This article will discuss some of the main types of non-conforming loans, how they work, and what you need to know before applying for one.

non conforming loans

Who Should Apply For Non Conforming Loans?

There are many reasons why someone may not be eligible for a standard loan from conforming lenders, including: 

  • a poor credit history,
  • a previously declared bankruptcy,
  • multiple declined loan applications on your record,
  • being self-employed and not having up to date financials as required,
  • not having a solid income or regular payslips (as a business owner, or contractor or freelancer where you regularly change jobs),
  • you have recently started a new business,
  • an outstanding ATO debt,
  • multiple streams of debt, and
  • little proof of savings for a deposit (either no savings or the deposit was inherited or gifted).

Conforming lenders require a good record of these things for the home loan approval to prove that the borrower is low risk and won’t dishonour their loan repayments.

Non-conforming loans can provide solutions that other types of financing don’t offer. 

The aim is to give people who don’t meet the standard lending criteria an opportunity and make it easier for them to buy their own homes or build wealth through investment properties.

How Does a Non-Conforming Home Loan Work?

Structurally, non-conforming home loans work very similarly to traditional home loans. 

The main similarities are that both types of home loans offer:

  • a fixed, variable or split interest rate, and
  • features like an offset account or redraw facility

The differences lie in the fees and interest rate. 

The repayment conditions are more strict than traditional home loans to provide a non-conforming lender with extra insurance if you default on payments. The lender needs to charge you higher rates and fees to cover their additional risk from lending without collateral. 

non conforming loans

How Much More Expensive Are These Types of Home Loans?

Like with standard lenders, the amount of interest on a non-conforming mortgage varies depending on:

  • the purpose for which it was taken out (refinance, purchase etc.), 
  • the term of your loan period
  • how flexible you want your repayment schedule to be, and
  • the percentage of loan to valuation of the property.

How much more non-conforming lenders charge depends on how complex your home loan application is. 

For example, if you can’t prove a regular income like a standard monthly salary, but you earn a high income irregularly and don’t have high expenses, you could be charged between 0.5% to 1% higher interest rate than a standard home loan.

If, on the other hand, your previous credit history shows extensive defaulting payments and bad debt, your non-conforming loan can be charged at 1% to 5% more than a regular home loan.

What Are the Different Types of Non-Conforming Home Loans?

The two most popular non-conforming home loan types are:

  1. bad credit home loans, and
  2. debt consolidation home loans with late payments.

People looking for smaller loans (such as personal loans) but are bankrupt can apply for a non-conforming bankruptcy loan.

1) Bad Credit Home Loan

Bad credit home loans are an option if you have a below-average credit rating. To be a good candidate for a bad credit home loan, you should have financial statements to prove a reliable income.

Non-conforming lenders will pay close attention to why you got into the situation of your bad credit in the past, but unlike traditional leading lenders, they’ll put the past aside and focus on the proof that your financial situation has significantly changed since then, such as you got a well-paying job in a good industry.

In this case, lenders offer the same features as conforming mortgages, but they come with a higher rate depending on your individual situation and circumstances with the addition of risk fee in most cases.

2) Debt Consolidation Home Loan

Debt consolidation home loans are designed specifically for people who have trouble managing their monthly repayments or find themselves unable to meet their current obligations in general. 

They allow borrowers to combine all of their outstanding debt repayments into one lump sum. This is then paid off over a longer time, meaning more financial freedom in the short term but paying more in interest over the long haul. 

Instead of managing multiple accounts and repayments, the idea with this type of loan is that borrowers only have to focus on one large monthly repayment. Thus, you won’t miss any more payments.

What About Low Doc Loans?

While a low documentation loan can be approved with less documentation than a standard home loan, they require a lot more than what a non-conforming home loan approval does.

Low doc loans usually require you to:

  • put down at least 20% deposit, 
  • have a consistently good credit history, and 
  • have proof of at least one year of continuous income.

non conforming loans

Key Takeaways

Non-conforming home loans are created for those who don’t meet the requirements or standards of a traditional bank.

Luckily, they can still be property owners – but with a little extra help. Employing the service of expert mortgage brokers can increase your chances of successfully applying for these types of loans.

A specialist mortgage broker from the Mortgage Agency can look at your personal financial situation, both past and present, and provide tailored advice to best suit your circumstances.

They can: 

  • Help you find non-conforming lenders. While conventional banks are plentiful, private lenders who offer these loans are not easy to find.
  • Introduce you to more than one non-conforming lender. This way, you can together weigh up which is best suited to your needs and your budget.
  • Use their years of experience to help you prepare your paperwork to have the best possible loan application and the chance of being approved.

At the Mortgage Agency, we strive to help every one of our customers become homeowners, no matter their circumstances. Contact us today to see how we can help you, too!

Disclaimer:

Please note that every effort has been made to ensure that the information provided in this guide is accurate. You should note, however, that the information is intended as a guide only, providing an overview of general information available to property buyers and investors. This guide is not intended to be an exhaustive source of information and should not be seen to constitute legal, tax or investment advice. You should, where necessary, seek your own advice for any legal, tax or investment issues raised in your affairs.

About Tony Xia

Having worked in the customer service and finance industry since 2011, our Director Tony Xia and his team’s highest priority is to cultivate a long-lasting relationship with clients based on trust and respect at The Mortgage Agency.

Related

Top 4 Questions To Ask Your Mortgage Broker

July 24, 2022
/
Mortgage Broker
Tony Xia
high lvr home loans

What Is An Interest-Only Home Loan & How Does It Work?

July 24, 2022
/
Investment Property Loan
Tony Xia

Breaking Into Property Investment—How A Broker Can Help

July 7, 2022
/
Investment Property Loan
Tony Xia

Borrowing Power: How Much Can I Borrow For My Mortgage?

June 24, 2022
/
Loan Tips
Tony Xia
key with a mini house

How Much Can I Borrow With A Guarantor Mortgage?

June 21, 2022
/
Loan Tips
Tony Xia
key with a mini house

What Happens When You Pay Off Your Mortgage?

June 21, 2022
/
Mortgage Broker
Tony Xia

Everything You Need to Know About a Pre-Approval Home Loan

April 1, 2022
/
Home Loan Tips
Tony Xia
first home buyer mortgage broker

How to Choose a First Home Buyer Mortgage Broker Suited To You

March 17, 2022
/
Mortgage Broker
Tony Xia
land loan

The Ultimate Guide on Land Loans

March 17, 2022
/
Loan Tips
Tony Xia
rental tax

How Is Rental Income and Loss Taxed?

November 15, 2021
/
Rental Tax
Tony Xia

Top 4 Questions To Ask Your Mortgage Broker

July 24, 2022
/
Mortgage Broker
Tony Xia
high lvr home loans

What Is An Interest-Only Home Loan & How Does It Work?

July 24, 2022
/
Investment Property Loan
Tony Xia

Breaking Into Property Investment—How A Broker Can Help

July 7, 2022
/
Investment Property Loan
Tony Xia

Borrowing Power: How Much Can I Borrow For My Mortgage?

June 24, 2022
/
Loan Tips
Tony Xia
key with a mini house

How Much Can I Borrow With A Guarantor Mortgage?

June 21, 2022
/
Loan Tips
Tony Xia
key with a mini house

What Happens When You Pay Off Your Mortgage?

June 21, 2022
/
Mortgage Broker
Tony Xia
Preferred partners
anz logo
ing logo
better choice logo
adelaide logo
auswide-bank-logo
beyond bank logo
bank australia logo
bank of sydney
bluebay homeloans logo
bluestone logo
bmm logo
citibank logo
cba logo
emoney logo
equifax logo
Firstmac-Logo-2016-Copy
fms logo
galilee logo
Heartland Finance logo
heritage
illion logo
get capital logo
latitude logo
latrobe logo
Macquarie_Bank_Logo_MBVert_BLK
me bank logo
mezy mortgage logo
mkm logo
movbe bank logo
mystate bank logo
st george
paramount logo
pepper money logo
virgin logo
plenti logo
qudos bank logo
resimac logo
suncorp bank logo
thinktank logo
ubank-logo2
victorian mortgage group logo
westpac logo
wisr
WLTH logo

Speak to the mortgage agency today

Talk to us now
hte mortgage agency footer
  • Home
  • About
  • Calculators
  • Services
  • Locations
  • Blog
  • Contact
Contact Us

Bella Vista Office

  • 217/14 Lexington Drive, Bella Vista, NSW, 2153
  • 0423 718 612

Parramatta Office

  • 19/103 George St, Parramatta NSW 2150
  • 1800 242 234

Penrith Office

  • 95b Station St, Penrith NSW 2750
  • 1800 146 759

Sydney Office

  • Seabridge House, Suite 120/377 Kent St, Sydney NSW 2000
  • 1800 146 759

Serving The Wider Sydney Area

  • Canterbury-Bankstown
  • Eastern Suburbs
  • Forest District
  • Greater Western Sydney
  • Hills District
  • Inner City
  • Inner West
  • Northern Beaches
  • Northern Sydney
  • St George
  • South-Western Sydney
  • Sutherland Shire
the mortgage agency logo
Tony Xia is A Credit Representative (477089) Of Mortgage Specialists Pty Ltd ACN 050 601 093 (Australian Credit Licence 387025)
Facebook-f Linkedin-in Instagram
Copyright @ 2022
  • Terms and Conditions
  • Privacy policy
  • Website Safe and Secure
  • Made With
  • By Digital Recipe