The value of UK property can go up as well as down, in line with changes to the overall health of the economy. If the value of a property against which you have lent falls, the borrower may find it difficult to meet their repayment obligations, particularly if they try to refinance their loan based on a reduced valuation.
To protect against this, we make every effort to minimise these risks for our investors and to ensure, where possible, that all investments are repaid in full and on time. In the event that a loan becomes non-performing we have the following protection in place:
- All loans are secured with a legal charge (mortgage), which means the property can be sold if the loan needs to be recovered.
- Loans do not exceed a maximum of 70% of the Open Market Value. This means that if the borrower cannot repay the loan it is highly likely that we will be able to recoup all funds from the sale of the security property, as there is a substantial amount of equity.
- For all our lending, we obtain a professional valuation, undertaken by RICS registered valuers with local experience, which are backed by professional indemnity insurance. Each valuation is carefully inspected by our experienced underwriting team to ensure the security is acceptable to support the lending proposal. Our legals are only ever undertaken by Top 100 law firms.
- In the unlikely event that we are unable to recoup all the funds from the sale of the security we maintain a discretionary Provision Fund to allow us to compensate investors should there be a shortfall in the capital. Note, however, that this is not guaranteed, so your investment choices should be based on your appetite for risk and capacity for loss.