Peer-to-peer backed shared ownership scheme launches

6 November 2020 | General

A shared ownership scheme backed by peer-to-peer (P2P) has launched, pledging to deliver net income of 3% per annum as well as 100% capital growth for investors.

OnStep allows people to live in a home without a mortgage, with a deposit of 5% of the property value.

This acts as an equity loan and the rest of the money is then funded through P2P finance to form a shared equity mortgage.

Once the home is purchased it is rented back to the tenants for seven years with a discounted monthly rental fee. Investors receive monthly income and share the capital growth with the tenant.

The investment can be held in an Innovative Finance ISA – which allows investors to use their annual tax-free ISA allowance – and at the end of the contract, the tenants have the option to purchase the home outright at market price; extend their tenancy or sell their investment and move on.

Rito Haldar, co-founder of OnStep, said: “OnStep provides investors with a hassle-free, tax-efficient way to get involved in the buy-to-let market, without having to take on landlord responsibilities.

“We’re clear that we hope to deliver annual returns of more than 3% for investors as well as the opportunity for 100% capital growth on their investment., which comes at a time when savings rates are historically low and property prices are continuing to rise steadily.

“All of this is achieved at the same time as helping first-time buyers get onto the property ladder and avoid mortgage heartache, so there’s a real social and moral purpose behind getting involved with OnStep.

“We also felt there was a need for a more ethical way to invest in the property market and OnStep offers just that, with this service making home ownership a reality for so many more people who simply can’t get onto the property ladder. With 10 per cent deposit mortgages rapidly disappearing from the market, there’s a huge opportunity for a solution like this.

“We carefully choose all of our tenants, verifying their income and expenses and making sure they have a clean credit history. As co-investors, tenants are responsible for all repairs and maintenance of the property, meaning it’s less hassle for investors than a normal buy-to-let property.”

Buyers with OnStep need to have an annual income of at least £40,000 and pass an affordability assessment to be considered for the scheme. Approved tenants also have the option of ‘staircasing’ up their share of the property by purchasing additional shares of equity.

Properties must be valued at between £250,000 and £750,000, be of standard construction and not be a new build in order to qualify. Homes considered for the scheme must also be of good quality and the focus is on existing family homes in desirable locations to provide stronger growth over time for investors compared to new build homes or rental blocks.

Ashwin Parameswaran, co-founder of OnStep added: “The mission of OnStep is to provide a service that makes a positive difference to our customer’s lives whilst also offering investors a sustainable and ethically conscious investment option.

“At a time of weak investment returns and poor savings rates, OnStep is a great way for people to invest their money and genuinely help people step onto the property ladder. It also provides an attractive option for investment portfolio diversification.”

This post has originally been featured in Property Wire.