Investors can join in the buy-to-let boom by lending as little as £100 to landlords in return for up to 9pc interest
Private investors are becoming buy-to-let mortgage lenders, attracted by returns of up to 9pc.
This trend is being driven by online "peer-to-peer" lending platforms which link "lenders" – the investors – with borrowers requiring mortgages.
Several platforms currently enable the tie-up, including LendInvest, Wellesley & Co, Assetz Capital and most recently Landbay.
Many of these are less than a year old but growing fast thanks to demand both for loans and for high investor returns. The risks posed to savers differ according to each lending model – and they can be difficult to assess.
On Landbay, the newest platform, investors with as little as £100 can choose a range of lending where higher risks equate to higher returns. There are three "risk grades" of loan: those where no more than 60pc of the property's value is lent; those with a limit at 75pc and those with a limit at 80pc. Lending all your money at 80pc of the value of the borrowers' property over three years attracts a return of 9pc. Lending at the cautious end – for no more than 60pc of a property's value – attracts a return of 4.8pc.
Several platforms currently enable the tie-up, including LendInvest, Wellesley & Co, Assetz Capital and most recently Landbay.
Many of these are less than a year old but growing fast thanks to demand both for loans and for high investor returns. The risks posed to savers differ according to each lending model – and they can be difficult to assess.
On Landbay, the newest platform, investors with as little as £100 can choose a range of lending where higher risks equate to higher returns. There are three "risk grades" of loan: those where no more than 60pc of the property's value is lent; those with a limit at 75pc and those with a limit at 80pc. Lending all your money at 80pc of the value of the borrowers' property over three years attracts a return of 9pc. Lending at the cautious end – for no more than 60pc of a property's value – attracts a return of 4.8pc.
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LendInvest, for example, which launched 18 months ago but in that time has lent £69m against properties worth £121m, includes mostly bigger, commercial loans in its business. It says its average return to investors is 8.15pc. Assetz Capital also offers investors less traditional opportunities including lending to turbine operators and small-scale property developers. Returns are as high as 12pc.
Why would investors lend to landlords who have been refused by banks?
One reason, says mortgage expert Ray Boulger of John Charcol, is that traditional lenders such as Lloyds Banking Group refuse to lend on some types of property, such as when there are multiple tenants. "There is a gap in the market which these lenders can fill," he said. "But investors need to understand the risks."
Another reason is that some lenders apply a limit to the number of properties a landlord can own and borrow against.
Source: The Telegraph
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