Pepper Home Loans

[hello1234]

Hi All,

Peppers haven't earned the best reputation in the home loan industry, however they seem to have entered the prime home loan space with competitive rates.

Anyone brokered one of these prime loans for your clients or used them personally? Do they charge excessive LMI? What are your thoughts?

 

[Peter_Tersteeg]

Their rates are competitive, but there's still plenty of more competitive options with mainstream lenders. Their fees are also significantly higher at $1,039 to establish the loan. They don't have LMI, but they do charge a 'risk fee' which is essentially the same thing except it's handled in house, not externally.

I wouldn't say they've got a bad reputation either, they've simply identified a niche and are catering to that niche.

I did recently broker a loan for a client where there was a few unfortunate circumstances which made it necessary to use Pepper. The loan certainly cost more than I'd normally like, but the deal was worth the extra cost. Overall I found dealing with them quite good and I'll recommend them again if the clients circumstances warrant it.

 

[Ausprop]

hard to trust these sorts of lenders, during the gfc the differences soon became apparent... don't forget lenders can set their rates to whatever the heck they like, at least with the big 4 there is some political pressure to keep them reasonable. these smaller guys went in for the kill

 

[Peter_Tersteeg]

Agreed Ausprop, they're certainly not a lender I'd choose if there is an alternative. I think I've written something like two loans with Pepper in 10 years. They are definitely a much higher risk lender than some of the more mainstream lenders.

 

[Corey Batt]

Every lender has their place, as the availability of funds is the #1 most important factor in reality.

Pepper is certainly in that category, if the client has a specific set of circumstances which means they cannot find funding in the traditional space, Pepper can be a useful albeit rarely used tool.

 

[tobe]

and unlike other lenders, Pepper isnt meant to be long term. Pepper give you a start, then you refinance when you qualify with another lender.

Its a little more tricky with their conforming low rate products at high LVR's as the new lender will charge LMI again, but refinancing from a mainstream lender has the exact same issues.

 

[MF35]

So are their Risk Fees comparable with LMI from a mainstream lender? Cheaper / more expensive?

 

[Peter_Tersteeg]

So are their Risk Fees comparable with LMI from a mainstream lender? Cheaper / more expensive?

Very much depends on the deal, but chances are it's more expensive.

The reality is that if you're considering using Pepper, it's because you've got a problem and the mainstream lenders won't fund it. At that point the question is not about the price, it's about if you want to proceed with the deal.

 

[hello1234]

The reality is that if you're considering using Pepper, it's because you've got a problem

Even using Pepper's new prime product would put you in that category?

 

[Colin Rice]

Even using Pepper's new prime product would put you in that category?

Pepper inquiry on your credit file may raise an eyebrow or two when financing with a mainstream so like Pete said only if you have no other choice, and sometimes that's the case.

 

[Mick C]

So are their Risk Fees comparable with LMI from a mainstream lender? Cheaper / more expensive?

Risk fee is more expensive for 80.1-85% loans.
ON par for >85% loans for property under $500,000

Risk fee more expensive for >85% loan for property over $500,000.

But to be honest ppl go for risk fee because they can't meet the traditional LMI loans.

Even using Pepper's new prime product would put you in that category?

Nope.
Still a pepper loan....even if it's a diff funding line. Some lenders would ask a bit of questions if they see that you got a pepper loan; as they always presume the worst.

Pepper's prime also has a bit of "nonconforming" smell to it as well..Ie the Prime Alt doc/low doc for self employed. No credit scoring, No LMI, non genuine etc...the list goes on.

 

[Peter_Tersteeg]

Even using Pepper's new prime product would put you in that category?

Pepper's new prime product is still quite an expensive product in most circumstances. Higher entry fees. Higher interest rates unless the LVR is extremely low. It's very easy to demonstrate this if we know what the property value and the loan amount is.