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LendingHome is effectively a different option to the usual mortgages process for residential real estate. Their platform and underlying technology will make the process a lot faster and simpler for investors and borrowers.
You can receive almost instant funds for your investment upon approval. However, you will need to have at least $50,000 in order to make an investment.
As a direct lender, LendingHome acts as the originator of loans by using their own capital. Once these loans have been close,d they will then be entirely sold to their institutional investors or else they will be broken down into Platform Notes.
This is how individual investors can get in on the action. For getting involved in the Platform Notes side of things, the minimum investment is only $5,000.
Pre funded loans
Unlike crowd funding platforms, you do not have to wait long for your loans to get funded as LendingHome closes the available loans by using their own capital.
Receive interest immediately
When you invest in the Platform Notes, you will instantly start earning interest on your principal investment.
Top quality customer service
When you start an investment account with LendingHome, you will be assigned your own investor relations specialist. They will email you and arrange a phone call to answer any queries or questions that you may have.
Wide range of investment options
At any given time, there are dozens of different investments you can choose from. This allows you to diversify your investments in a variety of opportunities rather than just looking at a handful of options.
You have to be an accredited investor
Only those who are accredited investors will be able to invest their funds with LendingHome.
High minimum investment
In order to be a retail investor with LendingHome, you will need to invest at least $5,000. This is significantly higher than most of their competitors.
Platform Notes not secured
As the Platform Notes are not secured, it adds an additional level of risk to your investment that you will need to consider.
No tying up all of your money in one investment. Our fractional notes let you spread out your dollars across a number of investments, reducing your risk.
Where LendingHome Stands Above Competition
LendingHome is not your traditional online real estate investment platform. You can start earning cash flow pretty much immediately. This is because you will get interest on your principal when you have invested in a Principal Note on the same day as you have made your investment.
There is also little to no waiting time to have your loan funded. This is because the platform will pre fund your loan as opposed to having to wait for it to be crowd funded.
LendingHome will close on every one of the available loans by utilizing their own capital. Another advantage with LendingHome is that almost the entire process is hands-off once you have made your investment.
Where LendingHome Falls Short
There are pretty high minimum required investments. If you are looking to act as a retail investor, you will need to make an investment of at least $50,000. If you are looking to invest in one of the Principal Notes, it is a bit more reasonable at $5,000 minimum, but it still is a lot higher than their competitors.
Unlike most of their competitors, there is not much information provided about the property in which the investments are for. This means that investors cannot comfortably complete due diligence on a given deal.
It is also only open to accredited investors, which will rule out a lot of individual investors. In terms of their Platform Notes, they are not secured, which adds an extra level of risk. Finally, because your LendingHome investments create interest income for you, you will have to pay a higher tax rate than you would if paying capital gains tax.
Fees & Features
There is a servicing charge levied by LendingHome which will be equivalent to 10% on the coupon rate. This is the same for their institutional and individual clients. There is also a performance fee that they will collect each month through the interest payments to clients.
This can be anywhere between 1.15% and 2.6% generally. Naturally, if an investment is making a loss, there will be no levying of this performance fee.
The main features of LendingHome is that they offer bridge loans that will allow investors to quickly make property acquisitions. It gives the investor enough time to organize a more permanent financing deal.
Generally, the standout feature of the platform is the speed at which you can get approval. There is a stringent application process which will properly vet the creditworthiness of a given investor. However, once this is complete, you will be able to close your loan in the subsequent two weeks.
There is a risk grade for each mortgage that they assign along with a corresponding coupon rate that reflects the level of risk for the loan.
How Does LendingHome Work?
First of all, you need to be an accredited investor in order to use LendingHome. Once you sing up, investors are able to browse the various Platform Notes that they can invest in. When you have decided upon which investment you want to make, there will be a stringent process to verify whether or not you will be eligible to utilize the platform.
Once you are given the green light, you will then need to link a bank account and add funds to the platform. There will be a couple of micro deposits into your bank account made by LendingHome to make sure that everything is working okay.
When the funds are available in your LendingHome account, you can then make your Platform Note investments. There will be interest earned from day one on these investments.
For those looking to borrow, there is a similar vetting process. The loans generally have rates starting at 7% and you can only use this for between one and four residential units.
You can borrow as much as $1 million and it has a lifetime of 12 months. There also need to be an 80% loan to value ratio. Generally, you save a significant amount in processing costs when compared to the traditional borrowing sector.
There are some issues with the transparency of the deals you will be investing in with LendingHome. There are no exact details given about the properties in which you are investing into with the Platform Notes.
This is due to privacy issues according to LendingHome. However, this means that sufficient due diligence for the investor is not really possible. Therefore, there is a reliance on LendingHome to properly vet these deals and to adequately gauge the level of risk.
There is also is an uncured default rate of over 2% on the active loans which is about double of what their competitors in the space would have, which is a concern for investors.
There are two main types of products on offer at LendingHome. They offer bridge loans to those looking to make quick acquisitions of property before they have a more permanent form of financing in place. Then there is the investment side of things where you can put money into Platform Notes, earning monthly interest on these investments.
Over the years, LendingHome has extended more than $1 billion worth of bridge loans to their users. The loans are pre funded on the platform, so you will very quickly be able to use this loan once your creditworthiness has been proven.
The Platform Notes can return generally from 5% to 10% in returns for your investments. To date, there have been more than $3 billion worth of loans funded through this investment feature. There is a minimum of $1,000 that you need to invest if you are on the auto-invest feature.
Deposits & Withdrawals
When you set up your LendingHome account, you will need to link your bank account to the platform. There will be two micro deposits made by LendingHome to ensure that everything is working okay.
Then you will deposit as many funds as you ant into your LendingHome account through your account on the platform. Monthly interest payments will be on your LendingHome account and you can withdraw them easily and directly through your LendingHome account, putting them straight into your bank account.
When you set up an investor account with LendingHome, you will usually be assigned a LendingHome investor relations specialist for your account. This person will then send you an email and organize a phone call to discuss any queries or questions you may have about LendingHome. This is a very good approach to customer service that is not seen elsewhere for the most part.
Security & Reliability
LendingHome sees itself as being a competitor with the likes of large institutions such as Anchor Loans and Goldman Sachs and not in the same bracket as crowd funding platforms.
Therefore, you would expect them to take their security fairly seriously. They comply with federal laws in relation to protecting the personal information of their users. There are computer safeguards and secured buildings used to do so.
What LendingHome Is Best For
- Accredited investors as they have access to deals that are exclusive and not available to the masses. Therefore, they have a better probability of availing of a good deal before it becomes oversubscribed.
- Diversification, as there is an impressive range of investments regularly on offer for you to choose from. With the auto invest feature, you can invest as little as $1,000 in a given product.
- Low fees when you are looking to borrow when compared to the traditional mortgage industry. Generally, the processing fees on bridge loans are a third lower than the rest of the industry.
- Short term investors as most of the deals have a life length of 12 months. Therefore, you can earn interest on your principal during this time and then exit a deal and have the funds available to you in about a year.