Risk Warnings & Mitigation

Almost all financial transactions, particularly involving borrowing or loans, have both benefits and a degree of risk.  Property Pact is enthusiastic to make sure that all borrowers and investors are aware of any potential risks and, as far as possible, we have put in place risk mitigation measures. We would urge you to read this section; for your own peace of mind, it is well worth reading.

Borrowers

Our website declarations have been made as clear as possible and we are sure that your Solicitor will point out any risks of which you should be aware.  However, there are a number of fundamental points that we wish to make clear:

  1. You will be paying interest at a variable rate, which is based upon the calculation of the Bank of England (BOE) +5.5%. Interest rates are currently at record low levels so you can anticipate with confidence that interest rates will increase.  Please bear this in mind and do not borrow more money than you can comfortably repay.
  2. Your Loan is for a maximum of 10 years. However, you can repay the Loan at any time during the loan period and you will only pay interest. The capital borrowed is only repaid when the property is sold or re-mortgaged.
  3. The scheme is a proportionately shared equity scheme. For example, if at the outset you borrow 15% of the total purchase price to add to your deposit, then at the time of sale the loan must be repaid and 15% of the increase in property value will need to be repaid to the investors.

Important note:

Property Pact has endeavoured to provide the fullest relevant information on this website but, if you have any further questions please email us at info@propertypact.co.uk or call our customer information service on 0207 164 6288.

Investors

There are numerous investment opportunities offered on the website and if they look too good to be true, they frequently are.  Property Pact investment opportunities are available as a logical result of property prices escalating more quickly than the rise in salaries, resulting in young professionals struggling to save an adequate deposit as it becomes more and more difficult to achieve. The immediate loan facilitated by Property Pact’s investors helps the borrower to get on the property ladder and achieve their objective of buying a home.  You do not only fulfil a worthwhile social service but also earn a fair interest return on your investment, and quite possibly a valuable capital gain assuming property prices increase.  However, your investment is subjects to a number of risks:

This is an unsecured loan. At the end of the 10 year period, if property pact has not heard from the borrower indicating that they intend to delay repaying their loan, the borrower would be invited to reapply to put their current details back on our website. Investors would be advised of this communication and if they wished to reinvest with the same borrower then this of course can be facilitated.

The terms and charges of the new agreement would be the charges at that date. Both parties, borrower and lender would need to agree that any capital appreciation would be carried forward until such time as the property was sold or refinanced.

Property pact would inform the borrower that the original concept of the loan was for short-term purposes and there may be more economic solutions in the longer term.

  1. Property value may fall as well as rise therefore your capital is at risk.
  2. You are lending your money directly to the person or persons and they are entirely responsible for repaying the interest and capital. To mitigate this risk, Property Pact will instruct the Borrower’s Conveyancing Solicitor to register a Restriction on the Land Registry Title Deeds which will provide you with a degree of protection.  Please click here to read the restriction notice in full, complete with an explanation in layman’s language.
  3. If you require your capital to be returned at any time, you could notify Property Pact and we will advertise this investment opportunity on the secondary market on our website without further charge. However, it should be noted that the capital return to you will only be the amount that you invested in the first place, and you will forfeit any capital appreciation on your investment, i.e. no capital appreciation.  We will also charge you a 1 percent administration fee to cover the transaction and banking costs.

These transactions are within the scope of the Financial Conduct Authority (FCA) and the regulations put forward are sensible risk warnings and probably list many risks which the average investor would not think of. We would therefore urge you to read this document in which we have put forward our answers to each of these questions to mitigate possible risk.

Important note:

We have tried to point out every conceivable risk in investing via Property Pact, but if you have any concerns or uncertainties, please contact us via email at info@propertypact.co.uk or call our customer information service on 020 7164 6288. We will provide as much further information as we can. This may well mean that we would refer you to other documents, legal assistance or helplines in an effort to help you understand your investment and any risks and rewards involved before investing.


Twelve months before the end of the agreed loan period, Property Pact will contact the Borrower(s) in writing to remind them of the terms of the loan and that it is due to be repaid in twelve months’ time. The Borrower(s) will be reminded in writing at three month intervals of the impending end of loan date and invited to communicate with Property Pact should there be any issues that the borrower feels may impact their ability to repay the loan in full.

At the end of the loan period, the original agreement will terminate and the investor(s) is/are entitled to receive his/her/their capital along with any capital appreciation.

The Borrower will need to have refinanced the loan, which can be done through reapplying through Property Pact, or via alternative means, such as a remortgage. For further options, the Borrower(s) will be advised to refer to an Independent Financial Adviser.