New ethical mini bonds scheme aims to get buyers on the property ladder and provide investors with average 5.5 per cent annual return
Property co-ownership company Joint Equity is partnering with FCA-regulated property financier Ingman Capital Partners to launch a new series of mini-bonds offering more attractive returns than buy to let but with a lower risk exposure than holding individual assets.
Investors buying the JEIP bonds get an escalating coupon of 4.5 per cent in years 1-5 rising to 6.5 per cent in year 20-25, and they get a terminal bonus at the end of the 25 year term worth 25 per cent of the Halifax Property Index growth over the full term. The Bond is tradable after three years and with the escalating interest rates offers attractive net present values.
The Joint Equity shared home ownership scheme is a revolutionary way to buy a home in 50/50 partnership as it unites bond-holders, through the investment vehicle, and lower-income house-buyers in a mutual partnership that sees both parties benefit. It is also about real partnership between the Resident Partner (the occupier) and the Non Resident Partner (JEIP) over the life of the occupation.
The scheme supports those whose earnings are too high to quality for local authority and housing association support, but who do not have enough money to raise a mortgage themselves. The Joint Equity scheme has three core groups: ‘reluctant renters’, retired renters, divorced and separated renters and is available to help buy homes worth under GBP250,000, with the average home funded through the existing schemes worth GBP150,000.
The home buyer (Resident Partner) needs to have a minimum 5 per cent deposit and be able to afford a maximum 45 per cent LTV mortgage to qualify, with JEIP providing the remaining 50 per cent of the purchase price. Resident Partners pay the 45 per cent LTV mortgage and an annual charge for the 50 per cent JEIP funding. Joint Equity provides access to a mortgage from its panel of providers and will cover 50 per cent of the conveyancing and survey costs and manage the purchase process.
Joint Equity and the JEIP investment bond is the brainchild of property developer Brad Bamfield and has been running since 2007. Following the success of its initial scheme, Joint Equity has launched the new bond to raise GBP3.5 million in the first round to allow between 48 – 50 properties to be purchased. Subsequent mini-bonds will then be issued in tranches of GBP3.5 million.
Brad Bamfield (pictured), CEO, Joint Equity, says: “These new mini-bonds allow investors to benefit from a revolutionary form of home ownership by co-owning properties with existing private renters who have been trapped outside the ownership market.
“This is an opportunity for investors to act in real partnership so that our property resident partners can have the stability and comfort of owning their own home.
“Our goal is to help those unable to get onto the housing ladder, to do so in a way that still enables them to choose the home they live in and gives them the flexibility to remain in it for as long as they want and to sell it when they want. It’s what we have done successfully since 2007 and we are delighted to now open this scheme up to more home buyers and investors by issuing a series of mini-bonds.
“We have more than 1,500 resident-partners who want to join the Joint Equity scheme and we believe the coupon available will be highly attractive to investors and that the escalating nature of the coupon combined with the terminal bonus will create a vibrant secondary market for bond-holders.”
Investing in a JEIP mini bond is easy to do, provides annual returns that are often higher than buy to let, has none of the management hassle or fees associated with buy to let, has a much lower default rate than buy to let and it provides a terminal bonus based on the Housing Price Index. It is an ethical investment that helps renters buy their own home and in a small way will help the UK housing crisis.
Home buyers apply to join The Joint Equity scheme and if they pass the eligibility criteria and are able to demonstrate they have the 5 per cent deposit and can raise a 45 per cent LTV mortgage they are accepted onto the scheme and are then able to find the property they want to buy.
The Resident Partner and JEIP (the Non-Resident Partner) then own the house 50/50 with the resident partner having full ownership rights and able to decide when they want to sell their share.