For many New Zealanders, getting onto the property ladder or refinancing a home loan can feel out of reach when banks say no. But being declined today doesn’t mean being locked out forever. Increasingly, borrowers are using non-bank lending as a stepping stone: securing the property now and then refinancing to a bank mortgage once circumstances align.
The Problem: A Bank Decline Isn’t Always About Affordability
Banks operate under strict rules and risk settings shaped by Reserve Bank capital requirements and CCCFA regulations. That means strong would-be borrowers can still get caught out by:
- Short work history: starting a new job or business with limited proof of income.
- Non-standard income: self-employed, contract, commission, or overseas earnings.
- Credit blemishes: a missed bill or short-term issue pulling down the credit score.
- Tight timelines: auction purchases or conditional deadlines banks can’t meet in time.
None of these necessarily mean a borrower can’t repay a loan — they simply don’t fit the bank’s boxes right now.
The Non-Bank Solution: A Bridge, Not a Dead End
Non-bank lenders provide flexibility by assessing borrowers on a case-by-case basis. They may use alternative documentation, accept different income sources, or provide short-term facilities that get the deal across the line.
Importantly, non-bank finance doesn’t have to be permanent. Many borrowers enter with the intention of refinancing to a bank product once they’ve built up the history, credit score, or equity position the banks require.
How the Stepping Stone Works
- Secure the property now: use a non-bank loan to buy the home or refinance under pressing circumstances.
- Stabilize your profile: build consistent income history, repair credit, or meet bank serviceability requirements.
- Refinance to a bank: once you meet mainstream lending criteria, switch to a bank mortgage with sharper long-term rates.
Who This Approach Suits
- First-home buyers: who don’t want to miss a buying window while they’re still piecing together documentation or savings history.
- Refinancers: with recent credit issues who want to restructure debt now and move to a bank once their score improves.
- Self-employed borrowers: who need one or two more financial years to demonstrate stable trading income.
- Investors: who need bridging or short-term facilities banks can’t deliver on the timeline required.
Case Example
A Wellington couple bought their first home using a non-bank loan after being turned away by their bank due to one partner being newly self-employed. After two years of consistent income and on-time repayments, they refinanced to a major bank at a lower rate — saving thousands in interest while keeping their home ownership dream alive.
Key Takeaways
- Non-bank lending can act as a practical stepping stone, not a last resort.
- The strategy works best with a clear refinance plan — know what criteria you need to meet to qualify with a bank later.
- Borrowers should budget for slightly higher costs in the short term, balanced against the benefit of entering the market sooner.
- Professional advice is critical: a broker or adviser can map the pathway from non-bank entry to bank refinance.
