What is a non conforming home loan?
These are loans that do not conform to a standard lender's
loan approval criteria. It means an applicant with poor credit
history, short time employment history, self employed, no
tax return and financial statements or being a non-resident
can apply for this type of home loan.
The applicant can borrow more than 80% of the value of the
home and the interest rate will be higher (usually 1% to 3%)
than a regular home loan. The interest rate will depend on
the applicant's credit history.
Advantages and disadvantages of non conforming home loans.
Anyone applying for this type of loan is categorized by lenders
as a high risk applicant and therefore the interest rate will
be higher than for a standard home loan. The applicants should
be aware that 1% or 2% higher interest rate may add thousands
of dollars over the life of the loan. Also. non conforming
home loans lenders will require stricter repayment conditions
and may penalise late or irregular payments.
On the other hand if the payments are consistent and on time
for a period of 1 or 2 years many lenders will reward borrowers
with interest rate cuts. This will not only establish good
credit record but also considerably reduce their monthly repayments. If you have several loans you could apply for a debt consolidation loan before you look for home finance.
If
non conforming home loans borrowers make regular
repayments over 3 years they may be able to refinance their
home loan with a standard variable interest rate home loan.
Your existing lender will most likely charge you an exit fee.
This fee can be a flat fee of a few hundred dollars or a percentage
of your outstanding loan amount. Borrowers trying to refinance
their home too early will most likely be required to pay a
very high exit fee practically preventing them refinancing
their home loan.
Non conforming home loans are available to borrowers not fitting
traditional bank criteria, however we recommend that anyone
looking for this type of home loans should contact a professional
home loan consultant and obtain all details before applying
for a loan. Contact our
non
conforming home loans specialist now.
Below is a table comparing
monthly repayments for a typical home loan of $350,000
over a 25 years period with different interest rates.
| Type of loan |
Loan amount |
Interest rate |
Monthly repayments |
| Home Loan 1 |
$350,000 |
5.5% |
$2149 |
| Home Loan 2 |
$350,000 |
6.5% |
$2363 |
| Home Loan 3 |
$350,000 |
7.5% |
$2586 |
| Home Loan 4 |
$350,000 |
8.5% |
$2818 |
| Home Loan 4 |
$350,000 |
9.5% |
$3058 |
| Home Loan 4 |
$350,000 |
10.0% |
$3180 |
For each percent increase more than $200 is added
in extra repayments per month for a home loan
of $350,000.
|
|
...
