Unbiased opinions about VOW finance please

My broker had done serviceability calculations and I am currently with one of the big 4 banks for my loan. But due to APRA, I am not approved for anymore release of equity.

My broker has said VOW finance will approve me. I am a bit worried about them as they are a “non bank”.

Is it safe to transfer my pride and joy to a non-bank? I know they are backed by Macquarie Bank.

I am worried they will maybe go bankrupt and disappear and my house will be lost. Or that they have some secret clause that screws me over long term. Can I have some unbiased information about transferring to a non-bank. I have done a search but mainly the VOW Brokers are the ones speaking positively about VOW.

Thank you in advance!

 

I suggest you read about how lending actually works. Read about the rams bankruptcy. You have so many mistaken ideas about what a lender does that nothing would assure you right now. And stop being so emotional about this.

 

Insolvency of a lender won't mean you lose your house. The loan will be assigned to another entity. Vow are probably not the lender anyway, but the 'badge'.

The major trouble with these sorts of loans is that they are probably all mortgage insured.

 

If someone like Cba won’t approve you, I’m surprised that Vow will as their calc tends to be conservative especially if you have rental income.

 

Most broking groups (Aggregators) have their own 'white label' product. Vow has Vow Finance. My aggregator is Choice, I 'Choice home loans'. Aussie has their own product as well.

It's essentially a branding exercise. White label brands are funded by a third party. It often leads back to a big bank.

There is a risk that that the white label provider could go bankrupt or be sold off although that could be said for any of the non-bank lenders. And they are essentially a non-bank lender even when they're funded by a bank.

If you take a loan with Vow, the only ones that will deal with that brand are Vow brokers.

 

Hi Terry,
What do you mean by the major trouble with these sorts of loans is that they are probably all mortgage insured?
There’s no lenders mortgage insurance payable as I am not borrowing more than 80% if that’s what you mean

 

Lender would pay it. But still insured probably

 

An 80% loan doesn't necessarily mean the loan isn't mortgage insured, it's just being paid for by the lender rather than yourself. These sorts of lenders tend to use what's called, "Secured funds".

My own understanding on this topic is fairly shallow, but this sort of funding does tend to be more risky. The institutional investor that supplies this type of money may only be lending it for a 5 year term. The loan itself is over a 30 year term, so the lender has to continually refinance your mortgage behind the scenes. If the lender can't refinance, then they default.

This was one of the major problems during the GFC. The end borrowers continued to make the repayments but their lender was defaulting behind the scenes. Penalty interest gets charged and passed onto the end borrower as rate rises. This all occurred in an environment where lenders couldn't refinance their loans, so borrowers had trouble refinancing out of those loans as well.

 

Thanks for your input on that!!.

 

Keep in mind that my example is from the GFC, almost 10 years ago. A lot has happened since then to prevent this and I doubt we're going to see a similar situation anytime soon. I don't really know much about the Vow product's funding, but I suspect they're through Advantage, then ultimately funded by the NAB - any Vow brokers care to comment?

That would suggest they've got reasonably secure funding. Not as secure as directly with the NAB, but pretty good.

The main issue I personally have with White Label products is they tend to obscure the source of the funds. There's usually several layers between the borrower and the actual source of the funds. Of course this also happens with the big banks and everyone else, but with the White Label products there has been a more extreme tendency to chop and change behind the scenes than with other lenders.

 

The Vow product is backed by Macquarie.