Frequently Asked Questions
What is peer to peer lending?
Peer-to-peer lending is the practice of lending money to unrelated individuals or businesses, “peers”, without going through traditional financial intermediaries like banks, often through online peer to peer lending platforms. Both the investor and the borrower benefit, as the lender achieves higher interest rates and the borrower lower interest rates than would be on offer if either had gone through a bank.
The era of the internet, including the rise of the electronic payments systems, has made this new age of peer to peer lending possible.
What are the benefits of peer to peer property lending?
With interest rates at all-time lows, it's natural that savers and investors are now looking for alternative avenues to put their money. Peer to peer lending provides many benefits including;
- High Returns: Lenders enjoy returns that are several percentage points above saving rates.
- Security: By securing the loan against an asset such as a property, the risk associated with the investment becomes significantly lower.
- Transparency: Individuals like knowing who they are lending their money to and for what purpose.
- Direct Lending: Lending to a construction project within a community provides many benefits to the local area and enhances the investment experience.
Property peer to peer lending has already been hugely successful in more developed alternative finance markets such as the US and the UK and is one of the fastest growing sectors of alternative finance.
Is Peer to Peer lending regulated in Ireland?
Peer to peer lending is a relatively new phenomenon that gained interest following the banking crash of 2008. As the industry is young, it is not yet regulated in Ireland. This does not mean the industry is shady or illicit, it merely means the Central Bank is letting the market develop before it brings in regulation. The Department of Finance has set out a number of proposals, and it'll likely be regulated in the near future.
Property Bridges has undertaken extensive legal advice and has been structured to follow the best practice models of mature crowdfunding markets around the world, such as the US, the UK and Germany.
Why is property the most popular sector within peer to peer finance?
By far the most popular sector in the burgeoning online alternative finance investments is real estate. According to a 2015 report published by the University of Cambridge the UK online alternative finance sector grew by 84% to £3.2bn. A key insight of that report was provided by Andy Pyle, the head of UK real estate at KPMG. Andy stated "Real estate in the UK is attracting strong investor interest across the board, and so perhaps it should come as no surprise that the sector ranks number one in the online alternative finance market. What’s maybe more interesting is how quickly the market is growing"
About Property Bridges
What we do?
We are a leading online peer to peer platform that facilitates loans to the construction sector. We source, assess and manage the risk associated with lending to the construction sector. We offer investors access to great asset backed securities and provide property developers with fast, efficient specialist financing.
Why invest with Property Bridges?
There are many reasons to invest with us and helping us achieve our goal of kick-starting the home building and alleviating the housing crisis. More directly, investors benefit from the points highlighted below.
- High Returns - At Property Bridges we pride ourselves on providing access to exciting property loans that yield high returns. Investors can expect to receive several percentage points higher than savings accounts and other asset classes.
- Security - All our loans are legally secured against property which dramatically reduces the risk assigned to investments. This gives investors an extra level of security.
- Issues free - All projects are managed by our experienced and effective team at Property Bridges meaning investors do not need to deal with issues associated with the investment.
- Building a better future - By loaning to local projects, investors can have a direct positive effect on the communities in which they live.
What fees do Property Bridges take?
There are no fees for lenders on the Property Bridges platform. Borrowers pay arrangement fees for the loans they require which will vary depending on the project. These are fees that are typical of the industry.
Is my money safe if something happens to Property Bridges?
For Property Bridges and the individuals involved, your money and its protection are our utmost concern. For this reason, we have developed a secure legal structure that will ensure investors money will be safe in the event of Property Bridges ceasing to exist.
Property Bridges never holds your money. When a user deposits money into his/her user account the money will sit in a client account with our payment provider, MangoPay. MangoPay holds investors money in a segregated client account with ING Bank. If Property Bridges, MangoPay or ING became insolvent the money in the segregated account would still be ring-fenced and would be available to be distributed back to investors.
A security trustee has been set up by Property Bridges to hold security over assets that have been used to secure the loans. If Property Bridges became insolvent, assets sitting with the security trustee would still be safe, secure and available to investors.
Why does the developer not borrow from a bank?
The landscape for development finance has changed significantly since 2008, with many traditional lenders pulling out of the market. Short-term property finance is a popular form of funding for professional property investors, landlords and developers that need to move quickly to secure a purchase, release funds to move onto the next stage of their property project or finance small-scale housing developments. This sort of funding is typically unavailable at the required speed with traditional lenders.
How secure is my investment?
Loans are secured with a first legal charge over the property or development site. This means that the borrower remains the legal owner of the property but the creditor gains sufficient rights over it to enable them to enforce their security (e.g. to take possession of the property or sell it. This is great for investors as it means that if something goes wrong, you are protected to a large degree by the value of the physical asset. This gives you peace of mind and means you are much more likely to be repaid, but remember regardless of the charge, your capital is still placed at risk and you can lose money when you invest in property.
How does Property Bridges assess loan enquiries?
1) Enquiry & Initial Assessment
- Send an enquiry to our team: Through online platform, email or phone.
- The case will be assessed at a high level by our team.
- If the enquiry is approved, we’ll request the borrower to send a suite of documents, typically including, planning permission, build costs, architects drawings etc.
2) Term Sheet
- If the project passes the initial assessment Property Bridges would issue a term sheet outlining the terms of the loan, including interest rates, arrangement fee, and term.
- When the term sheet is signed, we contact the borrower to obtain a commitment fee.
3) Full Due Diligence
- Once the valuer receives instruction, they will contact the borrower to arrange access to the property, and the necessary supporting documentation.
- On receipt of a valuation report, we conduct a full case assessment and draw up a credit report.
- If the property valuation does not match the value initially stated on the application documents, we may update the term sheet.
- Our solicitors will have a kick-off call with the borrower’s solicitor and ourselves before any legal work begin.
- The cost of this work will be charged directly to the facility. The fee will be variable, depending on each borrower’s case and will be additional to the charges of the solicitors working on their behalf.
- Once all requisitions are satisfied, the loan will get a final check from our team before being submitted to the platform.
- Prior to completion, we will call the borrower directly to confirm the loan details and make post-settlement servicing arrangements.
- After our final checks have been made, the borrower’s funds will be placed in escrow for drawdown. Drawdowns will be made in tranches so as to offer lenders the best returns and prevent performance drag.
6) Ongoing Monitoring
- We will regularly meet borrowers in person at their sites during the project to ensure that works are being carried out as expected and appropriate third-party compliances are issued during the build. This is crucial to ensure timely repayment of the loans. Due diligence and monitoring costs are charged to the borrower.
What happens if the borrower does not repay?
Despite detailed due diligence and monitoring, many issues can arise during the construction process. These include direct factors, such as cost overruns and indirect factors, such as bad weather. Projects can overrun, causing borrowers to miss the exit date of the loan.
As soon as there is any indication of a delay which may mean the repayment date is missed, we would contact the borrower to discuss rectification of the issues. Should there be an ongoing delay, which cannot be rectified over the remaining programme duration, they will then be required to apply for an extension to the facility. A negotiation will follow, agreeing the additional costs/charges for such, and this would be communicated onto the lenders on the platform. Once this is agreed with the borrower, the extension would be implemented by way of an amendment to the facility agreement.
Should a default occur, such as a delay, and the borrower fails to rectify this within the prescribed timeline, default interest will be charged from the date the default crystallises. This higher interest rate is designed to prompt the borrower to exit as soon as possible or rectify the default to our satisfaction.
If the borrower fails to repay at the end of the extended term, the borrower enters a pre-litigation stage. If no solution can be reached, we gather all the necessary evidence should enforcement of repossession be required. In the unlikely event that this doesn’t prompt a resolution with the borrower, we would then instruct our solicitors to take action against the borrower. If no solution is found this may result in Property Bridges appointing our receiver Kirby Healy to step in and recover the outstanding debt. All the necessary step in rights are included within the facility and security documents at the outset of the loan.
The enforcement process involves the sale of the property against which the loan was secured. Once the sale and enforcement costs have been subtracted the loan is repaid, any additional funds are then paid to the borrower. If there’s a shortfall in the proceeds received, we may look to recover it from the borrower’s personal guarantor or take action against the borrower and or their company. That said, the LTV and LTC limits we operate under ensure that only in a market crisis would such a loss occur. The time it takes to complete the enforcement process will vary from case-to-case.
What checks do you perform on borrowers?
We perform background checks on borrowers using credit data provider Stubbs Gazette. Further to this, we look into the borrowers professional past and previous property industry experience and assess whether they are suitable borrowers and whether they have suitable partners in place such as contractors and design team. With these checks complete we focus on performing a full due diligence assessment on the development project.
Who are MangoPay?
MangoPay is a leading online payment technology firm which we use as our payments provider. They have a full E-Money issuer license granted by the European Union and also assist us with our AML (Anti-money laundering) and KYC (Know your customer) checks.
As soon as you sign up to the Property Bridges site you will automatically be set up with a MangoPay account. When you make a deposit or investment, that money is held in your ring-fenced client account until the investment opportunity becomes fully funded. When an opportunity becomes fully funded, the money in your client account is transferred into the account of the borrower.
On your personal bank statements, you may notice that you have been debited by MangoPay, and not Property Bridges.
Please note that your funds are not protected by the Deposit Guarantee Scheme.
What Happens if a Loan Has to be Extended?
In Property development, it is common for projects to run longer than the expected term. Delays can occur for many reasons, many of which are outside the control of the developer such as bad weather or delays with a third party such as Irish Water.
If a project gets extended, lenders will be compensated by an additional 1% p.a. for the extended term. For example, if a project is paying 8% p.a. and the project is extended for 3 months. The lender will get 9% p.a. for those 3 months.
What am I investing in?
An investment on our platform is an investment in a specific loan secured against property. This type of investment is commonly known as an asset backed security.
How does the platform work?
Once fully registered on the platform, investors transfer money to their Property Bridges account via bank transfer. Loans are advertised on the platform and all loans will provide details of duration, returns, the borrower and other relevant details related to the loan. Investors can then invest in their preferred loan at the click of a button. When a loan is fully funded investors start accruing interest throughout the duration of the loan. Upon completion of the loan the investor will receive their original investment including interest.
Is my investment secured?
No, your investment is not secured. Your investment is a loan secured against a property. This means that if the borrower fails to repay their loan, Property Bridges can seek to recover any outstanding amounts by enforcing the security and taking possession of the property.
Is my investment guaranteed?
No, investing in our loans is not a risk-free investment and Property Bridges does not guarantee that your capital will be returned. Your investment is also not protected by the Deposit Guarantee Scheme.
Is the income that I earn net of tax?
No, the income you earn is gross of tax. You are responsible for your own tax affairs. If any further advice is needed please contact a certified tax advisor.
General Investor Questions
What are the typical lending opportunities?
Our lending opportunities are loans which have been secured against Irish based properties. We offer bridging, refurbishment, and development finance to construction firms throughout Ireland. Lenders can pick and choose their opportunities taking into account the risk and reward offered on a project by project basis. We would like to stress that even though lending opportunities are secured against Irish based properties, your money is still at risk. Past performance of the market is not an indicator of future returns.
How does a project get listed on Property Bridges?
Construction firms contact the team at Property Bridges with information about their project which must pass stringent measures. Experienced property finance, development and legal professionals evaluate each project thoroughly before it is listed.
What are the main reasons why a loan would be extended?
Given the nature of the construction industry and the number of moving parts present in the construction industry and reliance on different parties, extention requests are not uncommon. The most typical reasons include:
- Planning applications take longer than expected
- Construction work has been unexpectedly delayed (eg. severe weather, delivery delays)
- The borrower is waiting for legal work to be signed before a sale can be completed.
What is a bridging loan?
Bridging Loans are a short-term funding option which can be arranged in a matter of days (as opposed to weeks or even months with a traditional mortgage). They are simply weighing up the value of the asset, and the loan requested against it. Factors such as the borrower’s ability to service the repayments on the loan, and the borrowers plans for existing the facility can influence the interest rate offered.
What is an e-wallet?
Before making any active lending into our deals, Lenders need to fund their e-wallet. Our e-wallet and payments system is provided by MangoPay. MangoPay are an end to end payments solution that is particularly popular in the crowdfunding and peer to peer space. Your e-wallet will always display the funds available in your account.
Do funds earn any interest within the e-wallet?
No, funds do not earn any interest within the e-wallet.
How and when is interest paid?
Interest is calculated on a daily basis, however, the interest is paid at the end of the loan term along with the principle. These are paid back into the e-wallet.
What is a 1st and 2nd legal charge?
In a mortgage by legal charge or technically ‘a charge by deed expressed to be by way of legal mortgage’, the debtor remains the legal owner of the property, but the creditor gains sufficient rights over it to enable them to enforce their security, such as a right to take possession of the property or sell it. The debtor in this instance can be 1st in line or 2nd in line, for the 2nd charge the debtor will need consent from the 1st debtor to place a charge on the title.
All of the loans offered to investors by Property Bridges are secured against Irish property by either a 1st or 2nd charge.
Do these investments carry risk?
Yes they are. However, before placing any investment opportunity on our platform, the Property Bridges team reviews all aspects of the proposed deal to ensure quality and to prevent fraud. While we recognize that every investment involves risk, and there is always the risk of losing your capital, we strive to reduce that risk by providing you the transparency and tools you need to make an informed decision. As a Property Bridges member, you have full discretion to decide which projects to invest into and how much, and unlike other investments, your investments on Property Bridges will be secured by a tangible asset - property.
How are the returns estimated for each project?
Our team screens each developer and conducts extensive scrutiny of the proposed project before agreeing to list their projects. Depending on the project, the security available and the current market rates we then make an offer to the borrower. However, past performance should not be an indicator of future performance.
Is there an investment minimum and maximum?
Do I get charged legal fees?
The borrower is responsible for Property Bridges legal fees in addition to their own solicitor's fees. Prior to Property Bridges instructing solicitors for any legal work, the borrower is required to lodge legal fees inclusive of VAT with their own solicitor on an undertaking basis.
Do I need a valuation on the security property?
For us to consider an application there must be an independent valuation that is less than three months old. We also reserve the right to request a second valuation at the borrower's expense.
What types of projects are available to invest in on Katipult?
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