Published on October 13th, 2016 | by admin0
Financing a Peer to Peer Mortgage
Peer to peer lending is often used to fund small loans, and although each loan is typically made up of funds from hundreds of different investors, most rarely exceed a few tens of thousands of pounds. It’s possible, however, to contribute to a much larger loan – many people now source their mortgages through peer to peer lending, as it can provide an attractive alternative to mainstream mortgage providers, especially for landlords.
Peer to Peer Mortgages?
Landbay is one of the most popular peer to peer lending companies, and it provides mortgages for buy to let properties. Traditionally, buy to let mortgages have been more expensive than residential ones, but the continued robustness of the private rental market has fuelled ongoing growth and a corresponding demand for appropriate mortgages.
How can I invest?
Investing in a buy to let mortgage through Landbay is just as straightforward as opening a normal peer to peer account; simply choose the type of mortgage you wish to invest in and make a deposit; your money will be automatically diversified amongst the different mortgages being approved. Landbay is currently holding more than £60 million worth of mortgages, and there’s plenty of room for additional investors to jump on the bandwagon.
How safe is it?
Like most peer to peer lending products, Landbay maintains a “cover fund” to ensure that investors are repaid even if the borrowers miss a payment. However, this is seldom used – no Landbay borrowers have defaulted in the past three years, nor have there been any missed payments. This highlights the extra security which a peer to peer mortgage offers – mortgage payments sit at the very top of a landlord’s priorities list, and it’s very unlikely that they’ll allow it to fall into arrears. Landbay also has stricter limitations on landlords than other buy to let mortgage providers, requiring a higher minimum income and a larger deposit than other lenders.
Buy to Let Mortgages in the future
Although the UK rental market has performed very strongly in past years, the UK government recently took steps to curb the ability of landlords to buy up desirable property. This has made it more expensive for them to purchase property, and has also reduced the amount of tax relief they’re entitled to. This could potentially result in a slow-down of the buy to let property market, but it will also drive landlords to seek better mortgage deals – if Landbay are able to remain competitive, they could see an increase in business driven by landlords looking for a better mortgage deal.