So the bank rates are rapidly declining and you are looking for alternative ways to invest.
You may have been a successful property investor or developer with a decent portfolio in the past. Or perhaps you have some good experience in running a business.
You may be thinking about lending your own money privately, direct to the borrower. After all it can’t be that hard? You would choose the borrower and make your own mind up about who and where you want to invest your money plus adding your name to the first mortgage document adds to the security. Easy right?
Let’s take a step back to early 2015 and the changes made to the Credit Contracts and Consumer Finance Act (CCCFA). One of the effects of the changes was that before a mortgage can be transferred to you in your own name, you will need to be registered as a Financial Services Provider (FSP) under the Financial Service Providers (Registration and Dispute Resolution) Act 2008 Act (FSPA).
This is because if you went down the ‘DIY’ track you would be described as a creditor (lending money) and in the business of providing a financial service.
The FSPA requires that you register if you are in the business of providing a financial service. The CCCFA seems to assume that if you are a creditor then you are in the business of being a creditor and you need to be registered as an FSP.
If a private investor decided this was the way to go, there are costs involved summarised as:
- Application Fee $345.00
- Criminal History Check $40.25 (Per Person)
- Annual Confirmation $86.25
- Financial Market Authority Levy $529.00
- Dispute Resolution Provider Fee $1,115.00 (as at Jan 2016 - $1m - $10m)
The registration needs to be confirmed annually, and most of the above fees paid annually.
Sounds like too much trouble? Some investors think so, either ignoring the legislation or not being aware of it, and continue to lend their money, their way, but like everything there are risks involved.
For example, if a lender is not registered as an FSP the contract with a borrower may be unenforceable and cancelled. This includes the borrower not obliged to pay any fees or charges plus the lender would be unable to recover any money or repossess any property used as security.
Southern Cross Partners Limited is a registered FSP, belongs to a Dispute Resolution scheme Financial Services Complaints Ltd and licensed to provide peer to peer lending services under the Financial Markets Act 2013.
So don’t DIY your investments consider Southern Cross Partners instead, we are here to make mortgage investing easy and stress free.
