Alternative Home Finance
There is a category of finance available for those with a poor credit rating who wish to acquire their own home. This category of finance is called sub prime lending, but is also referred to as non-conforming loans in some markets. This type of finance has only come into being in Australia since about 1997. The need for an alternative existed because of the inflexible lending guidelines of most lenders. An increasing percentage of the workforce have been moving to part-time and casual employment, and were failing the conventional lending guidelines.
For example, recent statistics indicate that Australia has some 2 million casual, contract and part time workers. To add to this, almost 1 million Australians are self-employed, and these borrowers were also failing to pass the guidelines as a result of a lack of demonstrable income records.
Eight hundred thousand workers are above the age of fifty five, and finance companies don’t like to lend a 25yr home finance to more mature applicants. There are also some three hundred thousand people with credit defaults listed on their credit file. Add to that one hundred thousand new immigrant arrivals each year with no past credit history in Australia, and twenty five thousand new bankrupts every year, with a similar number being discharged from bankruptcy each year.
The conclusion of this is the obvious requirement for an alternative form of home finance with more flexible guidelines to cater to these various categories of people. Additional information about the different categories and providers of these more flexible forms of home finance can be found in the Non-Conforming Lending article linked to in the top paragraph.
For a more wide ranging and thorough review of all the different forms of home finance including all the full-doc loan options, in addition to lo doc and no doc loans, there is an additional article on that website on the different categories of home finance. When choosing a loan type, it is prudent to take into account factors other than the interest rate. As a general rule, the more flexibility and features that a loan has, the more elevated its interest rate will be, but the flexibility can be a blessing in the long run as it enables you to structure your payments for mortgage reduction purposes, either by making your payments bi-weekly as opposed to monthly, or by allowing you to add ad-hoc lump sums into your mortgage, or to offset the interest on a percentage of the balance of the mortgage by depositing your income or other savings into an offset account.
If the subject matter of mortgage reduction is of interest to you, I highly recommend that you check out Craig Romero’s Mortgage Cycling Revealed ebook. There is a link to Craig’s website behind the peel away ad image in the top right hand corner on the above webpage.
Further information on the different types of mortgage finance available, both sub-prime (non-conforming), in addition to conventional full-doc, lo-doc or no-doc loans, as well as thorough tips on mortgage reduction are located on the FinanciallyFree.com.au website.
