A NEW peer-to-peer platform offering to fund mortgage deposits for homebuyers will have its first borrowers live on the platform in the next two weeks.
Property Pact has been set up by former mortgage broker and developer Errol Woodhouse.
He said the platform was currently conducting due diligence on 12 borrowers and had 33 investors showing interest.
The fully-regulated platform creates loans funded by investors that can be used as part of a mortgage deposit for homebuyers.
Investors can fund from £5,000 to £25,000 into each loan and receive a rate of five per cent per year over the Bank of England base rate quarterly.
Borrowers will pay 5.5 per cent and the term is agreed with lenders, but can be from one to 10 years.
Unlike other P2P property platforms, security isn’t taken on the property but investors have a restriction – or equivalent of a second charge – that means they can take legal action in the case of any defaults.
Most property P2P lenders have avoided funding residential mortgages due to their long loan terms, but Property Pact focuses on funding the deposit.
Essentially borrowers end up with a Property Pact loan to repay on their deposit, alongside the actual mortgage.
Read more: Hot property
The platform undertakes due diligence of borrowers using credit referencing services.
Borrowers have to pay £150 to list their profile and must have a good or excellent credit rating, earn a minimum of £30,000 per year and have no county court judgements.
If approved, they will have a profile uploaded to the platform with their personal and property information so investors can decide if they want to invest.
“The government’s current strategy of taxing buy-to-let investors extra doesn’t help buyers as they still can’t afford a deposit,” said Woodhouse.
“People are finding it difficult to raise a deposit. There are a lot of people with money in bank accounts affected by inflation earning nothing.
“A lot of people would prefer to lend their money to somebody they thin they are doing a great service for and earning a rate of return on their investment.”