What is a specialist lender?

Specialist lenders, also known as non-conforming lenders, are lenders that offer mortgages to ‘non-vanilla’ borrowers who struggle to get finance at mainstream banks. This may include borrowers who are self-employed, in casual employment or new to Australia, as well as borrowers with bad credit.

Mainstream banks may require borrowers to fulfil strict eligibility requirements before they’ll offer a home loan. Specialist lenders often take a much more flexible approach, assessing individual mortgage applications to take the borrower’s circumstances into account.

For example, one common requirement to apply for a home loan is to provide payslips from your employer that show you earn sufficient income from your job to afford mortgage repayments. If a borrower isn’t paid a regular salary by an employer, they may not be able to satisfy mainstream mortgage lenders’ requirements, even if they earn a healthy income.

A specialist lender may allow borrowers to provide details of their income and expenses using documents other than payslips, such as tax records, bank account transaction histories, or even a letter from a qualified accountant. These home loans are often called low-doc or alt-doc home loans, as they may require less or different paperwork to mainstream home loans.

But while these loans may be more accessible to some borrowers, they’re not always the best options for every homebuyer. Because there is less documentation proving that the borrower can afford the mortgage repayments, lenders may consider these borrowers to be at higher risk of default, and thus may charge higher interest rates and/or fees than some more mainstream home loans. 

To get a better idea of whether a home loan from a specialist lender could be right for you, consider comparing home loans from a variety of different mortgage lenders. A mortgage broker may also be able to provide more advice on whether a specialist lender may be the best choice for your financial situation.

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