Non-bank lender Nano launched on Wednesday, promising home loan approvals in 10 to 15 minutes, as well as no fees on principal and interest home loans and the chance to “win” a home loan, interest-free.
Owner-occupiers with a loan-to-value ratio (LVR) of 75% who pay principal and interest would typically pay a variable rate of 1.99% (comparison rate 1.99%) at Nano, which is equivalent to the lowest 75% or higher LVR variable refinancing home loan rates on Canstar’s database, offered by Reduce Home Loans (comparison rate 2.05%), Northern Inland Credit Union (comparison rate 2.38%), Loans.com.au (comparison rate 2.47%), Illawarra Credit Union (comparison rate 2.93%) and Community First Credit Union (comparison rate 3.25%).
But Nano has advertised that anyone who refinances to Nano before 29 October (and settles their loan by then) is eligible to go in the draw to win their home loan interest-free.
According to Nano, an owner-occupier paying principal and interest on a $600,000, 30-year mortgage could stand to save $197,298 in interest if they win, assuming Nano’s interest rate remained the same throughout.
A Nano spokesperson told Canstar there were up to four interest-free home loans to be won, from two prize draws occurring on 1 September and 10 November, 2021.
“In the spirit of fairness, if customers refer their friends to join and refinance with Nano, and they win, the referee will also win their home loan interest-free,” the spokesperson said. “So, the more people you invite, the more chances you have to win.”
Bear in mind that if you enter but don’t win one of Nano’s interest-free home loans, you will still be committed to refinancing your loan with the non-bank lender. Canstar finance expert Steve Mickenbecker said it was important to consider whether its interest rate and features suit your needs on the whole.
“As with any other borrowing, make sure you’re getting a loan that is priced attractively and gives you the flexibility to make extra repayments and get ahead,” Mr Mickenbecker said.
The non-bank lender is currently only allowing customers to refinance existing loans held at other financial institutions, but says it will be looking to introduce loans for new home purchases “sometime in the future”.
How do you get a home loan at Nano?
To refinance to Nano, you’d need to have at least 25% equity in your existing property, or the equivalent in funds you could deposit into the loan before refinancing. This means having a maximum LVR of 75%.
You or your partner would also need to have a PAYG gross income of $100,000 or more to proceed with the application, Nano says. If your partner is self-employed, Nano says on its website that it may ask them some additional and different questions to satisfy its responsible lending requirements.
Refinancers must also have a minimum loan amount of $100,000, and a maximum of $2.5 million. However, Nano also advises that the total amount you will be able to borrow will depend on your personal financial situation.
Can I store savings at Nano?
Not in a conventional way, no.
Nano isn’t a traditional bank, which would be licensed as an Authorised Deposit-taking Institution (ADI) and regulated by APRA. It instead holds an Australian Credit Licence, meaning it can provide lending products – namely home loans at this time – but not deposits held in a savings account.
The lender does, however, have what it calls an “offset sub-account” linked to its home loans, with no account fees. The money stored in that sub-account would reduce the interest you pay on the home loan.
Unlike a regular offset account at an ADI where your savings would be guaranteed by the Australian Government up to $250,000 and sit in an entirely separate account, the Nano offset sub-account doesn’t have its own account number, sits within a customer’s home loan and can only ever be used to offset their loan or spent on other transactions, not as deposit funds.
Customers can make payments from the offset sub-account using a Nano Visa debit card, Apple Pay and Google Pay.
Is it safe to borrow from Nano?
Mr Mickenbecker said Nano was regulated by ASIC and borrowers could be reassured by the long history of non-ADI lenders in Australia, like Loans.com.au and more recently, Athena.
Nano operates differently to a traditional bank, being funded by the wholesale funding market which is made up of up institutional investors like superannuation funds, in comparison to traditional banks whose loans are largely funded by the deposits held in customers’ savings and transaction accounts.
The non-bank says it raised $33 million in April 2020, which it has used to write its home loans.
Mr Mickenbecker said the wholesale funding model had been particularly favourable in the past few years, but at various times wholesale markets could tighten up and lead to less appetite for that style of investment.
“Let’s say there’s a downturn in the housing market, for instance, then wholesale lenders would ask for a higher interest rate because the interest rate will go up as the risks go up,” he said. “When rates are going up, those wholesale sources tend to go up faster than bank deposits, which are the funding base of the big banks.”
Nano was previously known as Verteva but rebranded to Nano and wrote its first home loan via mobile in November 2020.