2nd Tier Lenders and Loan Deferral due to Virus

Discussion in 'Loans & Mortgage Brokers' started by Carol M, 26th Apr, 2020.

Join Australia's most dynamic and respected property investment community
  1. Carol M

    Carol M Well-Known Member

    Joined:
    3rd Jun, 2018
    Posts:
    110
    Location:
    Newcastle NSW
    Hi, are 2nd tier lenders being as generous as big 4 with home loan deferral when rent is reduced due to virus?
    Or are we soon to hear of landlords being foreclosed or charged high penalty interest rates if unable to keep up loan payments due to rent loss.
    Just asking as have been considering such lenders as a last resort for future purchase, but maybe too risky now, heading into a financial downturn, with severity unknown?
     
  2. Trainee

    Trainee Well-Known Member

    Joined:
    24th May, 2017
    Posts:
    6,043
    Location:
    Australia
    If you are that negative about the market, why are you still buying?
     
    Lindsay_W likes this.
  3. Carol M

    Carol M Well-Known Member

    Joined:
    3rd Jun, 2018
    Posts:
    110
    Location:
    Newcastle NSW
    hah, had hoped my first reply would be less negative, and more factual. Not surprised though :) Just trying to do some due diligence re banks in turbulent times.
     
  4. Rolf Latham

    Rolf Latham Inciteful (sic) Staff Member

    Joined:
    15th Aug, 2005
    Posts:
    7,544
    Location:
    Gold Coast
    If you are looking at Liberty as an example, unless you have a defined exit strategy window of 1 to 3 years DONT, the capacity to exit may become sticky, because if you reason to use them is driven by serviceability.......you got no where to exit to

    Pepper is okish, but same applies

    Firstmac, I dont have any concerns about

    Latrobe will also be okish, but be mindful the majority of their funds come from mum and dad local investors

    ta
    rolf
     
  5. Ko Ko Naing

    Ko Ko Naing Mortgage Broker Business Member

    Joined:
    10th Aug, 2015
    Posts:
    594
    Location:
    Melbourne
    Pepper's reply to loan deferral application was even faster than the big ones. A few questions asked during the phone call and approved!
     
  6. Carol M

    Carol M Well-Known Member

    Joined:
    3rd Jun, 2018
    Posts:
    110
    Location:
    Newcastle NSW
    Thanks, so to answer my own question: it seems from Peppers web-site they DO offer deferred loan payments now with interest capitalised similar to the big 4. Encouraging to see, as I thought they may have refused such help. Of course there are other risks in going with them, but at least on this score they seem to be willing to help.
     
  7. Lindsay_W

    Lindsay_W Well-Known Member

    Joined:
    1st Jul, 2015
    Posts:
    2,465
    Location:
    QLD
    I don't understand why anyone would be basing their decision on what lender to use on the fact they can/can't offer you a deferral on repayments :confused: If you think you're going to need a deferral, prior to even applying, then I would suggest not getting the loan in the first place.
     
  8. Jana

    Jana Well-Known Member

    Joined:
    19th Apr, 2016
    Posts:
    345
    Location:
    Sydney
    Does pepper approve loan deferral? Very surprised, I heard they only said to waive some loan fee that is all..
     
  9. Jana

    Jana Well-Known Member

    Joined:
    19th Apr, 2016
    Posts:
    345
    Location:
    Sydney
    What is the actual issue with say, Pepper/ Liberty?

    Do they randomly change interest rate- that means increase without reason? I heard good an bad stories. Despite being small player, I wanna find real reason. For ex, how they perform compared to Macquarie?
     
  10. Closet

    Closet Well-Known Member

    Joined:
    23rd Oct, 2017
    Posts:
    367
    Location:
    Australia
    As an example one of them recently put up interest rates by 0.9% on some approved applications...
     
  11. Jana

    Jana Well-Known Member

    Joined:
    19th Apr, 2016
    Posts:
    345
    Location:
    Sydney
    What was the reason behind? They can’t do it randomly??
     
  12. Trainee

    Trainee Well-Known Member

    Joined:
    24th May, 2017
    Posts:
    6,043
    Location:
    Australia
    why not?
     
  13. Closet

    Closet Well-Known Member

    Joined:
    23rd Oct, 2017
    Posts:
    367
    Location:
    Australia
    I assume risk and they have a captive market...the majority who use these lenders are doing it for serviceability or other limiting reasons...have a read of some of the old posts here or on Somersoft about what happened in the gfc...plenty of fore warning from some of the brokers around the risks of using these lenders and going in with your eyes wide open...
     
    JohnPropChat likes this.
  14. Ko Ko Naing

    Ko Ko Naing Mortgage Broker Business Member

    Joined:
    10th Aug, 2015
    Posts:
    594
    Location:
    Melbourne
    Yes, they approved it for 3 months.
     
  15. Jana

    Jana Well-Known Member

    Joined:
    19th Apr, 2016
    Posts:
    345
    Location:
    Sydney
    I have no intention to use them. My borrowing power almost doubled with them, so really surprised the way they operate.

    I dont think GFC type scenario is valid. Most banks fully dried at that time. Now 10 yrs they are mature. Still there should be some hidden stuffs.

    One of my friends who was with Bigs, got 1% interest rate hike because he was considered as high risk. So one/ two examples are not adequate to make conclusion. Happened in 2017, he was forced to fixed in otherwise..
     
  16. JohnPropChat

    JohnPropChat Well-Known Member

    Joined:
    10th Sep, 2015
    Posts:
    2,188
    Location:
    Middle Earth
    Peppers and LIbertys of the lender world have their place. Commonly used by three groups of people
    1. Can't get finance with mainstream lenders due to servicing calc. Lenders of last resort so to speak.
    2. Can't get finance due to bad credit history. No choice elsewhere.
    3. Tricky/non-standard deals that the mainstream lenders push to their Commercial lending departments.

    Since they don't play by the usual rule book, they can pretty much do whatever they want and that is why Brokers highly recommend there be an exit strategy when using these lenders.

    Your friend could easily refinance to another big bank if he/she met the requirements of the first one, no reason why they won't be able to move to a different lender assuming all else stayed the same (income, debt, vals etc). If you friend was with Pepper and they hiked the rate by 1% then he/she is stuck until they can meet the lending criteria of mainstream lenders.
     
    Jana and Closet like this.