How Non-Bank Lending Can Be a Stepping Stone to a Bank Mortgage

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

1. Secure the property now: use a non-bank loan to buy the home or refinance under pressing circumstances.
2. Stabilize your profile: build consistent income history, repair credit, or meet bank serviceability requirements.
3. 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.

Disclaimer: This article provides general commentary only and is not financial advice. Always consider your personal circumstances and seek qualified guidance before entering into lending agreements.