Unique peer-to-peer backed shared ownership scheme offers investors annual returns of 3% per annum

A new shared ownership scheme backed by peer-to-peer (P2P) finance is looking to capitalise on the UK’s buoyant property market and deliver net income of 3% per annum, increasing with inflation*, alongside the potential for 100% capital growth** for investors.

OnStep was created to help bridge the gap between renting and owning a home, with the team behind the platform wanting to help first-time buyers “avoid mortgage heartache” and step onto the property ladder.

The solution gives people the opportunity to live in their dream home without a mortgage and a deposit of just 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.

A new property company is set up to purchase the home, which is then 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.

Net income starts from 3% per annum, increasing at the rate of inflation from the third year, with capital growth estimated at 100% over seven years.**

OnStep founders Rito Haldar and Aswin Parameswaran are also behind the successful peer-to-peer business Unbolted, which was founded in 2013 and allows people to borrow against a range of assets. OnStep has been launched under the same regulatory permissions.

The option for investors to capitalise on house prices through OnStep also comes at a time when there is increased activity in the market, with September recorded as the fastest annual rate rise in the UK’s property market since the Brexit vote in 2016.***

Rito 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.”

OnStep Homes is an FCA-regulated financial services company. Both co-founders are experienced in the financial services industry having worked at companies such as HSBC, Barclays Treasury, Credit Suisse and Bank of America Merrill Lynch.

To find out more, visit: https://onstep.co/.

Notes:

* Annual returns of 3% is based on the starting interest payable on the investment. It increases at the rate of CPIH from the 3^rd year onwards.

** Estimated 100% capital growth over 5 years based on England house price index growth of 38% over 7 years from Apr’13 to Mar’20. Past performance is not a reliable indicator of future performance.

*** Report from Nationwide Building Society: https://www.theguardian.com/money/2020/sep/30/uk-house-prices-rise-at-fastest-rate-since-2016-says-nationwide-covid-19

Kindly shared by Onstep Homes

Main article photograph courtesy of Pixabay