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Post by emoney on Oct 21, 2014 10:51:59 GMT
Good morning, we have an £80K secured second charge bridging loan at 40% LTV paying lenders 11% yield that we are about to approve and list on the eMarketPlace, the borrower will be taking the loan interest only over 2 years.
Within the gross loan will be 2 years worth of interest payments that we will be retaining on account to service the loan. I would really appreciate lenders (current and prospective) feedback as to whether this type of pre-paying of interest payments is deemed a positive or negative when making a lending decision.
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Post by reeknralf on Oct 21, 2014 14:58:13 GMT
The loan itself appears OK at face value.
I don't like the 2 years interest idea. In effect, I'm lending £10, £8 is going to the borrower, and he will make repayments in 2 years from now. My remaining £2 is going to sit in the emoney bank account, and be drip-fed back to me. This just creates a lot of unnecessary paper transfers, and gives me the illusion that the first 24 payments are being made, when in truth no real repayments are being made at all.
Perhaps I'm missing something. What are the benefits of the scheme, to lender or borrower, as compared with the borrower borrowing less and repaying in 2 years?
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spyrogyra
Member of DD Central
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Post by spyrogyra on Oct 22, 2014 20:29:03 GMT
Though it might be a nightmare in terms of accounting, it would be best if investors have the ability to choose the way interest is paid (just like SS). Personally I prefer the monthly payments assuming that thus I would keep the option to resale if I want to.
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bugs4me
Member of DD Central
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Post by bugs4me on Oct 22, 2014 21:24:54 GMT
Good morning, we have an £80K secured second charge bridging loan at 40% LTV paying lenders 11% yield that we are about to approve and list on the eMarketPlace, the borrower will be taking the loan interest only over 2 years. Within the gross loan will be 2 years worth of interest payments that we will be retaining on account to service the loan. I would really appreciate lenders (current and prospective) feedback as to whether this type of pre-paying of interest payments is deemed a positive or negative when making a lending decision. May I clarify the point about a 'secured second charge'. My assumption would be there is another party as first. Is that correct? Also, is the 40% LTV after the first charge holders obligation been fulfilled?
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Post by rthompson8811 on Oct 22, 2014 22:15:46 GMT
The loan itself appears OK at face value. I don't like the 2 years interest idea. In effect, I'm lending £10, £8 is going to the borrower, and he will make repayments in 2 years from now. My remaining £2 is going to sit in the emoney bank account, and be drip-fed back to me. This just creates a lot of unnecessary paper transfers, and gives me the illusion that the first 24 payments are being made, when in truth no real repayments are being made at all. Perhaps I'm missing something. What are the benefits of the scheme, to lender or borrower, as compared with the borrower borrowing less and repaying in 2 years? So our £2 pays for the interest, but when do we then get our full £10 back too? Is that monthly starting after 2 years? If so, how long will it take for the full amount plus interest to be repaid?
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Post by emoney on Oct 24, 2014 12:51:35 GMT
Sorry, I may not have explained; There is a 1st Charge to a mainstream bank for approximately £100,000 and the borrower is looking to borrow a second charge Peer to Peer secured loan of £75,000 on a property valuation, (being completed today) of estimated £400,000. The borrower is completing renovations on the property and is then looking to sell it, as the borrower is a builder his ability to service the loan needs to be financed via borrowings, we do not operate interest roll up Peer to Peer secured loans. Once the borrower completes the renovations, he will be selling the property and will be returning to be income generative, proof of this income has been supplied. The borrower therefore only needs 1 years cash to service the interest for a 1 year of the loan and not 2. The capital will be repaid between the 12 and 24 months upon sale of the property. Lenders will receive monthly interest repayments on their capital lent in the normal manner. The 1st years interest is retained to ensure the lenders interest is serviced. I hope this answers all your questions?  |
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Post by emoney on Oct 24, 2014 14:02:23 GMT
The valuation has now come in at £350,000 and has just been listed as follows; Gross Loan £75,000 2 Year term 59% LTV Secured by 2nd Legal Charge Fixed Yield 11% (1 Years Interest retained on account following offline dialogues with lenders on this forum) Thanks to everyone for your feedback. |
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