Money360 offers a first in p2p lending: To my knowledge they are the first live p2p lending service applying the concept to financing real estate loans.
Loan sizes are much bigger than seen before in p2p lending. Minimum loan amount is 200,000 US$, maximum is 5 million US$. The minimum a lender can invest in an individual loan is upscale too: 50,000 US$. This does fit the target audience though as only accredited investors residing in California can join as lenders.
Loans are secured: Each Lender is listed with an undivided fractional interest on the promissory note and deed of trust.
When the transaction is complete and the loan is closed, Money360 will receive a closing fee of 2% of the loan amount. This fee is paid by the Borrower, typically out of the loan proceeds. Money360 charges the Lenders an annual servicing fee of 1.5% of the loan amount for providing all loan servicing functions.
My take on this: The size of real estate loans enables the marketplace to earn interesting fee volumes even if the number of loans is low. The approach chosen by Money360 requires high investments by lenders. A challenge for other marketplaces could be to develop a concept with lower investment minimums, possibly listing the marketplace (instead of each individual lender) on the promissory note and deed of trust.
Depending on national market, mortgages are are difficult loan segment to establish p2p lending in, as rates are very competitive and margins are thin. In some European markets interest rates for mortgages are currently below 3%, effectively disallowing fee structures like the one Money360 takes in the US.
(Hat tip on Money 360: SocialLending.net)
3 thoughts on “Money360 – P2P Real Estate Loans”
I structured an intrafamily mortgage with my son two months ago through National Family Mortgage. I am a previous client from Circle Lending / Virgin Money and kept in touch with Tim Burke. I highly recommend their service. It’s much more cost effective then what is described above. I would much rather see my son get ahead in life then a stranger!
If the returns are comparable (8-12% range), what investor wouldn’t prefer a loan secured with collateral?! For borrowers, unfortunately not many people qualify for these low mortgage rates these days. Banks are ridiculous. This model improves greatly on the typical hard money lenders charging 6 points and 15%. I just went on their site and lenders can set their preferences on what loans they want to seeâ€¦pretty cool!
I think Bill misses the pointâ€¦.not every son has a Dad that can be his real estate lender. I will follow these guys closely.
This new model makes a lot of sense. Why didn’t someone think of it before? Secured loans beat unsecured loans by a mile.
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