Non-Bank Lender Cost Calculator NZ

Updated  Rates and fees vary widely between non-bank lenders. Use the figures you have actually been quoted.
Quick answer Borrowing $500,000.00 at 9.50% instead of a bank's 6.50% costs $34,833.46 over the 24 months you expect to be there, once the fees at both ends and the slower paydown are counted. The repayment is $1,043.93 a month higher, and if the refinance never happens the cost over the full term is $377,815.13.

Second-tier lending gets discussed as though the rate were the whole story, and it is not even the main part of it. A three point gap sounds enormous and, over two years on an ordinary loan, costs less than most people assume. What actually determines whether the arrangement is sensible is how long you are in it, and whether there is a real plan to leave. A non-bank loan taken deliberately as a bridge, with a clear view of what has to change before a bank will take you and roughly when, is a priced decision. The same loan taken because nothing else was available, with no exit and no date, is not a bridge at all, and its cost should be judged over the whole term rather than over an escape that was never scheduled. This page shows both numbers, because the difference between them is the decision.

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The loan
The plan to leave
True cost over the bridge
$34,833.46
for 24 months
Extra each month
$1,043.93
the payment you have to afford
If you never refinance
$377,815.13
over 30 years

Side by side over the bridge

Non-bankA bank, if you couldDifference
Monthly repayment$4,204.27$3,160.34$1,043.93
Paid in over the period$100,902.50$75,848.16$25,054.34<5,054.34
Balance still owing at the end$493,527.58$488,448.46$5,079.12
Fees at the start$2,500.00<,500.00$500.00$2,000.00<,000.00
Fees to get out$2,700.00<,700.00$0.00$2,700.00<,700.00
True cost of the non-bank route$34,833.46

Comparing repayments alone would be misleading, because the two loans pay down principal at different speeds. Adding what you still owe at the end to what you have paid makes them directly comparable.

Where the cost comes from

Extra interest over the period$30,133.46
Extra fees to set up$2,000.00<,000.00
Early repayment fee$1,500.00
Cost of refinancing to a bank$1,200.00
True cost over the bridge$34,833.46
Cost per month of being there$1,451.39

How the cost grows with time

If you stayTrue costPer month
12 months$19,732.59$1,644.38
24 months$34,833.46$1,451.39
36 months$49,997.31$1,388.81
60 months$80,485.86$1,341.43
The full term$377,815.13$1,049.49

The cost per month falls the longer you stay, because the fixed fees at both ends spread over more months. The total keeps climbing.

This compares a non-bank loan against a bank loan you may not be able to get. That is the point of the comparison, but it means the result is the price of access rather than a choice between two available options. Rates, establishment fees, broker fees and early repayment fees vary widely between non-bank lenders and by borrower, so use the figures you have actually been quoted rather than these defaults. The calculation assumes both loans are ordinary table mortgages with the rate held constant, which is a simplification over any period longer than a fixed term. Most importantly, it assumes you will be able to refinance when you plan to, and that depends on your circumstances and on lending policy at the time, neither of which is guaranteed. Non-bank lenders are regulated as financial service providers rather than as registered banks.

The exit is the whole decision

Everything about whether second-tier lending makes sense turns on the exit, and the rate barely matters by comparison. A two year bridge at three points above bank rates is a defined cost that buys a property you would not otherwise own, and for many self-employed borrowers or people with an ageing credit issue that is a reasonable trade. The same loan with no exit is a different product entirely. The useful test is whether you can say what has to change before a bank will take you and roughly when. If the answer is vague, price the arrangement over the full term rather than the bridge, because that is what you are actually signing up for.

Repayments alone understate the difference

Comparing what you pay each month is the obvious approach and it is wrong, because two loans at different rates reduce the principal at different speeds. Over the same period the cheaper loan has not only cost less in interest, it has also left you owing less, and both parts belong in the comparison. Adding the balance remaining to the amount paid makes the two directly comparable, and the gap that produces is the honest figure.

Fees at both ends matter more on a short bridge

Establishment, broker and early repayment fees are fixed amounts, so their weight depends entirely on how long you spread them over. On a two year bridge they are a substantial share of the total cost, and on a ten year stay they barely register. That has a counterintuitive consequence: the shorter the bridge, the more the fees matter and the less the rate does. If you expect to refinance within a year, negotiating the establishment fee is worth more than negotiating the rate.

Worked example

A borrower takes $500,000.00 over 30 years at 9.50% from a non-bank lender because no bank will lend to them yet. A bank would have charged 6.50%. They expect to refinance in 24 months.

Setting up costs $2,500.00 against a bank's $500.00, leaving is expected to cost an early repayment fee of $1,500.00, and refinancing to a bank will cost a further $1,200.00.

Over those 24 months they pay $100,902.50 against a bank borrower's $75,848.16, and still owe $493,527.58 against $488,448.46, so the slower paydown adds to the gap rather than offsetting it. With the fees at both ends the true cost of the bridge is $34,833.46, or $1,451.39 for every month they are there. The repayment is $1,043.93 a month higher, which is the figure that has to be affordable.

The number worth reading twice is the last one. If the refinance never happens and the loan runs its full 30 years, the arrangement costs $377,815.13 more than a bank loan would have.

How this is calculated

Both loans are treated as ordinary table mortgages over the same term at a constant rate, and the monthly repayment for each is calculated with the standard amortising formula. Over the period before the expected refinance, the amount paid in is the repayment multiplied by the number of months, and the balance remaining is calculated by amortising forward to that point. Adding the balance remaining to the amount paid gives a figure that is directly comparable between the two, since it accounts for the different speeds at which principal is repaid. The true cost is the difference between those two comparable figures, plus the difference in setup fees, plus the early repayment fee and the cost of refinancing, both of which fall only on the non-bank route. The full term figure repeats the same calculation over the whole term with no exit, so the early repayment and refinancing costs drop away.

Official sources

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Frequently asked questions

What is a non-bank lender?

A lender that is not a registered bank. In New Zealand they include finance companies and specialist mortgage lenders, and they lend where banks will not, for example to the self-employed with limited trading history, to borrowers with credit impairment, on properties banks regard as difficult security, or where the loan to value ratio is outside bank policy. They charge more because they take more risk, and they are regulated as financial service providers rather than as banks.

Is a non-bank mortgage a bad idea?

Not inherently. It is expensive, and whether it is worth it depends on what it buys and how long you need it. Used as a bridge for a year or two while a business builds its accounts or a credit issue ages off, the cost is a known number and can be a reasonable price for getting into a property. Used indefinitely because no exit was ever planned, it becomes very expensive. The variable that matters most is not the rate but the time.

How long do people usually stay with a non-bank lender?

There is no reliable published figure for New Zealand, and the honest answer is that it depends entirely on why you are there. What matters is that you know what would have to change for a bank to take you, and roughly when that will happen. If you cannot state that, you are not on a bridge, and the cost of the arrangement should be judged over the whole term rather than over an exit you are hoping for.

Why does the calculator include the loan balance in the comparison?

Because comparing repayments alone is misleading. Two loans with different rates pay down principal at different speeds, so a straight comparison of what you have paid out ignores the fact that one of them has reduced your debt more. Adding what you still owe at the end of the period to what you have paid over it makes the two directly comparable, and that difference is the true cost.

Will refinancing to a bank definitely be possible later?

No, and that is the risk that does not appear in any of these numbers. Refinancing depends on your circumstances at the time and on the lending policy that applies then, neither of which can be relied on. If the exit does not arrive, the cost is not the figure over your expected period but the cost over however long you actually stay, which is why the calculator also shows what the arrangement costs if nothing changes.