Key risks of investing in first charge mortgages

Property related risks

Your investment is secured by a 70% LTV mortgage on a UK residential property. If the property prices fall below 70% of the purchase price, you may suffer a loss. We manage this risks by independent research of the negotiated sale price as well as obtaining a RICS valuation of the property.

There may also be isolated and idiosyncratic risks associated with a single property, which may have been difficult to identify at the purchase stage but impacts its value later.

Tenant related risks

If the tenant refuses to vacate the property at the end of the term and we are unable to obtain repossession of the property (for reasons that we cannot ascertain now), we may find it difficult to sell the property or may have to sell at a substantial discount to market price.

If the tenant is unable to maintain rental payment during the term of the agreement, it may impact our ability to pay you monthly interest on the loan. With an uncooperative tenant, we may also find it hard to sell or refinance the property at the end of the term.

We manage these risks by conducting thorough checks on the proposed tenant, including employment, income and affordability checks. We also mandate that the resident tenant has a minimum commitment of 6% of the funding required to purchase the property, so as to align interests.