by Michelle McGagh, Pensioners thinking of using their freed pension cash to get into buy-to-let may have to turn to crowdfunding to fulfil their plans.
New peer-to-peer lender Landbay is offering finance to those who want to purchase a buy-to-let property but who are frustrated by age restrictions on mortgages.
Crowdfunding works by pooling money from investors to fund certain projects, in this case the purchase of a property, with the peer-to-peer platform essentially marrying up those who want to lend with those who want to borrow.
Landbay aims to provide alternative finance to those who may not qualify for, or are not in the target market for, traditional lenders.
Landbay chief executive John Goodall said banks and building societies had become stricter over who they would advance buy-to-let loans to and had clamped down on lending to professional landlords and first-time landlords.
‘Banks are not lending to professional landlords or first-time landlords…Banks want to lend to people earning £300,000 a year who want to buy a holiday home to rent out,’ he said.
The tougher lending conditions mean pensioners using the relaxation of pension drawdown rules to access their entire pension pot with the hopes of investing in property may find it harder than they expected.
Goodall said many pensioners will also be too old to secure a loan from a traditional lender and most will only offer mortgages where the terms runs past age 70. This is in contrast to Landbay where loan terms are five years and can be taken until age 80.
‘Most banks will not lend beyond age 70 but the first landlord we loaned to was 71 and we will lend to a maximum age of 80,’ said Goodall.
‘There is lots of talk at the moment about the change in annuities meaning that everyone becomes a landlord but I don’t think it will have as much of an impact as people think, but we are an interesting provider from that point of view.
‘We will tap the market for people realising money from their pension…but we are not saying everyone should rush out and become a landlord.’
The deal for borrowers
Borrowing money from Landbay will be comparable in rates to mainstream buy-to-let mortgages but the terms are far shorter, meaning borrowers will have to refinance every few years on the property they find.