Specialist lending is a segment of the mortgage market dedicated to providing alternative home loan solutions to borrowers who are unable to meet the lending criteria set by banks and Lenders Mortgage Insurance (LMI) providers.
There are numerous reasons why a borrower may fall into the specialist category and there is no single characteristic that pigeonholes every specialist borrower together.
- Failed to meet LMI
- Failed to pass credit scoring
- Previously been declined
- New Australian permanent residents
- Multiple debts to consolidate
- Needs to payout business/tax debt
- Cash out needed for business purposes
- Refinance of private/solicitor finance
- Discharged bankrupt
- Late payments or mortgage arrears
- Defaults, judgements or writs
- Part IX & X debt agreements
- Self-employed < 2 years
- ABN registered 12 months
- Income from casual employment
- Income from family payments
How is specialist lending different to mainstream lending?
Fundamentally, there is no difference to how you would approach offering a specialist home loan to your clients. You will still follow the same line of enquiry in relation to the borrower's requirements, objectives and financial situation, and then take the appropriate steps to verify the information.
As a specialist lender, we use a more personalised approach:
- Don't use credit scoring
- Broader credit policy
- Manually assess every application
- Examine each individual’s circumstances - no two customers are the same!
How can I introduce a specialist solution to my client?
The challenging part of specialist lending is neither the assessment nor the writing of the loans. Where a challenge can lie is in offering a specialist solution to your client, especially if they were expecting a prime solution from a traditional lender.
To help you understand how to successfully present a specialist solution to your clients, Pepper Money has devised the following 5 step process:
- Step 1: Acceptance Mode
- Step 2: Offer the Alternative
- Step 3: Offer the Repayment
- Step 4: Long Term Objectives
- Step 5: Proceed to Application
Find out how to practically apply this model to your business
Pepper Money accredited brokers can complete our Specialist Lending eLearning module