Non-conforming lenders specialize in approving loans for borrowers who don't fit traditional bank criteria.
What Are Non-Conforming Loans?
Non-conforming loans (also called specialist or subprime loans) are for borrowers outside standard lending criteria.
Who Needs Non-Conforming:
- Credit impaired (defaults, bankruptcy)
- Self-employed with complex income
- Foreign income earners
- Recent arrivals to Australia
- Unusual properties
- High LVR with credit issues
- Multiple income sources
Non-Conforming vs Standard Loans
Standard Bank Loans
Borrowers: Pristine credit, PAYG income Rates: 5.5-7.5% p.a. LVR: Up to 95% Criteria: Strict
Non-Conforming Loans
Borrowers: Credit issues, complex situations Rates: 6.5-12% p.a. LVR: Up to 80% Criteria: Flexible, individual assessment
Types of Non-Conforming Lenders
1. Non-Bank Non-Conforming Specialists
Examples: Pepper Money, Liberty, Bluestone Rates: 6.5-10% p.a. Best for: Credit issues but property equity
2. Private Lenders
Rates: 8-18% p.a. Best for: Severe credit issues or very unique situations
3. Specialist Loan Programs
Rates: 7-12% p.a. Best for: Specific niches (foreign income, specific professions)
What Non-Conforming Lenders Accept
Credit Issues: ✅ Paid defaults ✅ Unpaid defaults (sometimes) ✅ Discharged bankruptcy (2+ years) ✅ Court judgments ✅ Multiple late payments ✅ Part IX debt agreements
Income Issues: ✅ Self-employed <2 years ✅ Cash businesses ✅ Foreign income ✅ Contractor/commission ✅ Multiple income sources
Property Issues: ✅ High-density units ✅ Rural properties ✅ Unusual construction ✅ Properties banks won't touch
Non-Conforming Loan Rates
Rate Tiers:
- Light impairment: 6.5-8% p.a.
- Medium impairment: 8-10% p.a.
- Heavy impairment: 10-15% p.a.
Factors affecting rate:
- Severity of credit issues
- LVR (lower = better rate)
- Property type
- Loan amount
- Deposit size
Path to Bank Finance
Many borrowers use non-conforming as a bridge:
Year 1-2: Non-Conforming Loan
- Rate: 9% p.a.
- Pay on time (every payment!)
- Build credit history
Year 2-3: Refinance to Bank
- Rate: 6.5% p.a.
- Save $12,500/year on $500k loan
- Credit now acceptable to banks
Total interest saved over 10 years: $125,000+
Ready to explore non-conforming options? Connect with specialist lenders.