When can P2P Crowd Funding really benefit the people? Part 2.
As crowd funds are dispersed to buy 80% of the property price, there is a schedule return. During the first few years, the buyer of the property have to repay the 20% loans from the banks. This 20% can be a substantial amount for a B40.
As the value of the property increases over time, this 80% worth becomes 100% and 120%. For e.g., the property of RM100,000 becomes RM123,000 in three years (7.2% annual growth). So, the 80% which was RM80,000 actually is protected by the market value of RM120,000 (around there).
Now, as the “owner” has yet to fully settle the debts, he does NOT own the property. When the RM80,000 P2P Fund is now worth RM120,000, he is still servicing the 20% with interest. Assuming that he is a hardworking person, his income could increase over time. By 5 years’ time, his income might have doubled. By then, he could have paid off the 20% loan from the bank and have surplus money to pay for the property or eligible to take another mortgage. At this point, if the price is kept at its original selling price, then this is a benefit.
This way, a person could indeed take advantage of P2P crowd fund to cover the 80% of the property price despite the bank not being able to give out loans for whatever reason.
But, it isn’t!
So, in 5 years time, he could start owning a home like any other M40 or T20 in the strata of household income. But, in the current state of FundMYHome, it isn’t so.