High demand prompts new construction loan

by Miklos Bolza21 Nov 2017
Non-bank lender Pepper Money has announced a brand new construction loan, responding to strong demand from the broker channel.

The firm has expanded its construction loan offerings into the Pepper Essential prime product while enhancing the construction options available under the Pepper Easy near prime range. Interest rates start from 3.94% p.a. (comparison rate 4.16% p.a.).

Pepper has been writing near prime construction loans for over 18 months with application volumes increasing by 148% this quarter compared to the same period last year, said Aaron Milburn, Pepper Money’s director of sales and distribution.

This is a combination of the broker market share rising to 55.7% plus a growing consumer preference to build or renovate a new home rather than purchase an existing house, he told Australian Broker.

“Following terrific success with credit-impaired and other ‘near prime’ borrowers the natural next step is to expand our offering to brokers looking for a competitive product that meets the needs of prime clients who require a bit more flexibility than that offered by traditional lenders.”

As well as expanding its current construction offering to prime borrowers, Pepper has also expanded the offerings available to prime, non-prime and self-employed applicants. For instance, investors now have access to construction loans up to 95% LVR for a full doc loan and up to 85% LVR for an alt doc loan.

The lender may also consider up to two dwellings for owner occupier or investment purposes on one title. These changes come into effect immediately.

The firm’s construction products also come without any third party lenders’ mortgage insurance (LMI) approval or credit scoring required.

“With no affiliation to LMI providers and no credit scoring algorithms we’re able to really listen to borrowers, and apply the human touch to better understand their situation. We’re really a one-stop-shop for brokers seeking to service a wide range of customers,” Milburn said.

Instead, each application will be manually assessed in line with Pepper’s unique cascading underwriting process which gives borrowers automatic access to three products and three credit policies through the single application.

Members of the underwriting team will review each deal, speaking directly to the customer or broker to better understand that individual’s circumstance, he said.

“We understand that everyone is different and by applying a cascading credit model over all facets of our residential construction offering, our aim is to help more people achieve their dream of home ownership.”

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