As a form of alternative finance, there is growing interest in peer-to-peer lending mortgage platforms for borrowers and investors alike.
We will explain the reasons why but for borrowers there are some advantages for opting to use a P2P lender rather than a high street bank.
But first we should probably explain what peer-to-peer lending is and it’s a form of lending and borrowing between individuals or peers.
There’s no involvement with a bank or building a society or indeed any other financial institution.
Essentially, if you want to borrow money to buy a house, for example, then the peer-to-peer website will match up your request with people who are willing to lend money, or a proportion of the money, to you.
Bridging loans rates
The criteria for borrowing will vary between lenders but in some cases, they can offer lower bridging loans rates of interest than a traditional lender will do.
You will also need to pass various credit checks and possibly the lender may use a credit reference agency as well.
The advantages of peer-to-peer lending include:
- Peer to peer lenders can be cheaper than building societies or banks
- Some peer to peer lenders have no minimum loan amount
- They offer a viable alternative for those who may struggle to get a traditional bank loan.
Along with a quick application process, some peer-to-peer mortgage lenders may be willing to offer up to £2 million to an applicant for their loan.
A lot will depend on the value of the property being purchased and also for the property being used as a security if that’s what the lender requires.
Accessing a peer to peer loan UK
There are downsides to accessing a peer to peer loan UK and most lenders are upfront about this and they include:
- The interest rate can be higher than for traditional loans
- There may be administration fees to pay for arranging the loan
- For many potential borrowers, the advantages of a peer-to-peer lending mortgage will outweigh the disadvantages and for those with a good credit score, then they will be able to access low-interest rates.
As mentioned earlier, the application process tends to be quicker for peer-to-peer lenders than it is with traditional banks and building societies and the money can be arranged in just a few days and certainly within a few weeks.
A lot will depend on the type of property being purchased and if the borrower already has a relationship with the lender.
For landlords and property developers, the ability to act quickly to snap up a property bargain is made easier with the quicker application process for a peer-to-peer mortgage.
It helps too that the lender will have a calculator on their website to show a potential borrower how much their loan will cost, including fees and charges, so they can make a balanced judgement about whether the lender’s offer is right for them.
Take advantage of a peer to peer mortgage
We mentioned at the beginning of this article that there are attractions for borrowers who can take advantage of a peer to peer mortgage and there are also potentially lucrative opportunities for those interested in lending money to those who want to buy property.
The Bridge Crowd can offer more help and advice in this regard and their offering means an investor could make up to 12% p.a. on an investment. This means interest is paid at 1% per month with the average loan term being six months with a maximum loan being 12 months.
For lenders interested in peer-to-peer lending then your capital will be at risk.
However, the loan is secured over a UK property with the lender taking a first or second charge mortgage and the property is valued by an independent RICS-approved surveyor.
The maximum loan to value for a peer-to-peer mortgage is 70% with the lender choosing which loans they are interested in. It helps that the Bridge Crowd also invests in the deals with years of experience in underwriting.
There’s no doubt that the current low-interest rate environment and the potential for stock market upheaval have led many investors to search for better investment opportunities.
Why peer-to-peer lending has taken off
This is one reason why peer-to-peer lending has taken off because of the excellent returns available and the use of the platform that will arrange the deals.
Borrowers also get to cut out the middleman by not approaching a bank or building a society for their funding needs.
Essentially, the peer-to-peer mortgage will see a number of investors offering money which also helps share out the risk for a potential loan.
If you would like to know more about a peer-to-peer lending mortgage, either as a borrower or as a potential lender, then it’s time to speak with the friendly team at the Bridge Crowd.