The loan provider ACEMA has placed a new batch of loans to invest in on Bondster that allows investors to achieve above-average returns. These loans are second lien loans and are secured by a piece of real estate that serves as collateral for first lien loans. Thanks to the value of the property, the collateral is sufficient, and ACEMA rates these loans as low-risk. The total LTV for currently offered loans ranges from 57-72%. The combination of rapidly rising real estate prices on the Czech market and the gradual repayment of debt through loan repayments further reduce investor risk over time.
How does it work?
Loans are ranked according to the order of individual pledges to the mortgaged property. This type of financing is most often used in development projects, where the first lien loan is issued by a bank, whereas the second lien loan is provided by group financing platforms or other institutions. Banks simply cannot provide the full funding needed for a project because they must adhere to strict rules on the maximum amount of capital/loan they can provide relative to the value of the pledged property (LTV*). LTV limits vary by country, but bank loans generally do not exceed 60% of the total property value. Financing by a second lien loan is thus a common practice that brings investors the opportunity to achieve a higher return on loans secured by real estate.
The granting of a second lien loan from ACEMA is preceded by a proper assessment of the applicant's ability to repay as well as their credit history, just like with any other loan application. If the value of the pledged property is high enough to allow providing another loan, the second lien loan can be disbursed after all conditions have been met. These loans are usually used for business development or renovation of the property. "In this case, the risk for investors is still low, and its value is indicated by the LTV ratio which represents the value of the loan to the value of the collateral for both loans provided. The 10-11% interest offered makes investing in secured real estate loans one of the best deals on the market,” says Richard Kouba, Bondster's Chief Sales & Marketing Officer.
You can invest in secured loans with a return of up to 11% on Bondster from 11 August 2021, when these loans were introduced to our platform.
If you want to include these investments in your portfolio, you can easily find them by the type of collateral. If you use Autoinvest, you can select the preference for these loans in its settings in the field “Collateral".
Note: *LTV (Loan to Value) indicates the ratio between the amount of the loan and the amount at which the pledged property was valued at the time of concluding the loan agreement. The lower the LTV, the more secured the investment is. For comparison, mortgages in the Czech Republic are provided up to 90% of LTV.
Author: Michal Rázga