Second Tier Lenders NZ: How They Differ From Banks

by | May 31, 2024 | Mortgage News

Are you struggling to secure a home loan due to bad credit or unique financial circumstances? Second-tier lenders in New Zealand might be your lifeline. Unlike traditional banks, these lenders offer a valuable alternative for Kiwis who don’t meet standard lending criteria.

Whether you’re self-employed, facing IRD tax arrears, have a low credit score or poor credit history, second tier lenders can, and often do, provide the financial support you need.

If you’ve been turned away by a bank, exploring second tier lending could be the key to realising your long-term property goals.

What are Second Tier Lenders?

When you’re looking at obtaining a mortgage in New Zealand, you have the option of going to first-tier lenders—mainstream banks like Westpac, ASB, ANZ, and BNZ—or second-tier lenders, which often include non-bank entities.

These lenders offer loan products tailored for those who may not qualify with traditional banks. Unlike primary banks, they provide more flexible lending criteria. In New Zealand, these lenders include Resimac, Liberty, Bluestone, Squirrel Money, Avanti Finance, and Pepper Money (among others).

These lenders offer mortgage loans tailored to various needs, including purchasing your first home, acquiring investment properties, securing commercial real estate, obtaining rural finance, getting a second mortgage, and accessing business loans.

They cater to borrowers in unique financial situations and assess home loan applications on a case by case basis.

They help borrowers such as:

  • Bad credit history, including defaults, judgments, or a generally poor credit score
  • Self employed and business owners
  • High debt to income ratios
  • Low deposit, less than the usual 20% required
  • Non-residents or those with complicated residency statuses
  • Urgent funding needs, such as bridging loans, or short term finance needs
  • Unique or unconventional property loans that the banks might consider too risky (such as borrowing for a tiny home)

Building societies and credit unions are considered non-bank lenders. They provide financial services similar to those offered by traditional banks, such as accepting deposits and providing loans, but they operate under different regulatory frameworks and often have a member-focused approach. Typically smaller and more community-oriented, they can offer a more personalised services and competitive interest rates.

When a Non-Bank Mortgage Might Benefit

Second tier lenders are not bound by the same strict lending restrictions set by the Reserve Bank of New Zealand. This allows them to offer customised solutions and quicker approval times. However, they still must uphold responsible lending practices to ensure borrowers don’t overextend financially and comply with the Non Bank Deposit Takers Act.

Lenders still assess a borrower’s ability to repay, ensuring loan terms align with the individual’s financial stability. This involves scrutinising income patterns, current debts, and overall financial health.

Some believe that non bank lending options only cater to borrowers with poor credit. However, these lenders serve many clients, including professional property investors and first-home buyers. Here is a rundown of how they can be helpful alternative mortgage lenders:

For Residential Property Investors

Face Value of Other Bank Loan Payments: Non-bank lenders consider the actual amounts you pay on your existing loans (the face value) rather than applying a hypothetical higher interest rate to test your ability to repay. This approach can make it easier for investors with multiple properties and loans to qualify for additional financing.

By using the actual payment amounts rather than higher stress-tested rates, non-bank lenders make it more feasible for investors with a property portfolio to get approved for new loans. Traditional banks often use higher rates to ensure borrowers can handle potential interest rate increases, which can limit borrowing capacity.

For First Home Buyers

Many second-tier lenders are willing to accept smaller deposits, making it easier for first home buyers to get on the property ladder. They offer more personalised loan products that can be tailored to the specific needs of first home buyers, such as interest-only loans or loans with flexible repayment terms.

For Commercial Property Buyers

Commercial properties and mixed-use developments are complex in nature and may have a higher perceived risk. A non-bank lender may recognise the potential for diverse income streams and be willing to consider the unique aspects of the property investment. They may have a more adaptable approach to commercial real estate financing.

For Those Needing Flexible Loan Products

A variety of loan products are available catering to specific needs. Bridging finance, property trading finance, and equity release are among the available options, each designed for different scenarios. For example, professional property investors benefit from bridging finance for short-term project funding, while homeowners can harness equity release to access additional funds. Customised products ensure that borrowers find solutions suited to their unique financial situations.

For Business Owners and Self Employed

Nonbank lenders like Liberty Finance and Resimac offer tailored solutions considering various factors beyond credit scores, such as income patterns and existing financial commitments. This flexibility makes them an attractive option for a wide range of borrowers.

The Trade Off For More Flexible Lending

Higher Setup Fees and Interest Rates

Non-bank lenders typically charge higher initial fees (setup fees) and offer loans at higher interest rates compared to main banks. This is a trade-off for their more flexible lending criteria and quicker approval processes.

For instance, Pepper Money charges a $749 establishment fee, between $10 and $15 per month in administration fees, and a $500 fee when you pay out your mortgage. (Sourced from their last updated fees and charges list dated 1 December 2023).

All second tier lenders nz should provide detailed breakdowns of fees, rates, and repayment schedules. Borrowers are encouraged to thoroughly review these agreements, and many lenders offer customer support to clarify any uncertainties, ensuring a smooth borrowing experience.

If you’re unsure, talk to your local mortgage adviser at OneStop Financial Solutions, we can help explain the loan agreement to you.

Example Case Study

Here’s an example scenario for a first home buyer in New Zealand who might need to use a second-tier lender:

Name: Sarah

Age: 29

Occupation: Freelance Graphic Designer

Annual Income: $70,000 (variable due to freelance nature)

Credit History: Sarah has a few minor defaults from her early 20s, which have impacted her credit score.

Savings: $30,000 saved for a deposit

Desired Property: A small house in Auckland priced at $600,000


  1. Credit Rating: Sarah’s score is not strong due to a past credit card default, making it difficult for her to secure a mortgage.
  2. Employment Type: As a freelancer, her income is variable and less predictable, which traditional banks might view as risky.
  3. Deposit Size: Her $30,000 savings represent only 5% of the property’s value, while most banks require at least a 20% deposit.


Sarah approaches the Auckland mortgage brokers at OneStop Financial Solutions. After hearing no from the banks, they suggest a second-tier lender because they have more flexible lending requirements. They help her through the application process, and the lender assesses her overall financial situation, including her current income and potential for future earnings.

They agree to provide a mortgage with a 10% deposit requirement, recognising her consistent income over the past few years despite its variability.

The lender also offers more lenient terms on her credit history, understanding that her defaults are several years old and she has been financially responsible since then. They provide her with a mortgage at a slightly higher interest rate than the big banks would offer. This allows her to purchase her first home without waiting several years to save a larger deposit and help her enter the property market.


Exploring second-tier lenders in New Zealand can be a viable option for those facing unique financial challenges. These lenders offer more flexible and tailored solutions compared to mainstream banks. Remember to evaluate factors like interest rates, setup fees, and customer service quality when choosing a lender. Responsible lending practices are essential to ensure your financial well-being. By considering these aspects, you’ll be better equipped to make an informed decision and secure a loan that meets your needs. As always, our experienced brokers are here to help. 

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