Unlike most other investments, your investment is supported by a first mortgage registered against a piece of Real Estate. Better yet, you are able to select the location and the Loan To Value ratio that best suits your investment risk profile and investment strategy.
Frequently Asked Questions
Can you help me choose my investment?
This decision is yours to make. We can help explain any procedural matters that are unclear to you, but we cannot provide you with any advice or guidance in respect to individual loans or to your wider investment strategy. If this is required, we would urge you to speak to a suitably qualified Authorised Financial Advisor.
What entities can invest?
We are happy for you to invest in any legal entity, provided that full disclosure of all parties is made, and that the appropriate documentation is supplied.
How do I know my tax rate?
This is something that is specific to you. Inland Revenue have a scale of rates for personal investors, dependent on your annual income level. There are also specific rates applied to other entities. These are all available on the Inland Revenue website, or by calling your local Inland Revenue office. If you have a financial advisor, they will also be able to assist you with this. Please note that tax rates can change as the Inland Revenue make changes or as your circumstances change. It is up to you to ensure that we are deducting tax at the correct rate for your circumstances.
What happens if the borrower does not pay their interest?
Firstly, Southern Cross Partners will deal directly with the borrower in an effort to sort out the problem. We have a lot of experience with this, and a range of strategies that we employ.
In respect to your interest payments, these are paid from the installments that the borrower pays to us. If they do not pay, Southern Cross Partners may elect to make up any shortfall. If we do this, your payments will continue, unaltered, and we will collect any shortfall payments from the borrower. If we elect to not pay you the shortfall, you will be entitled to 50% of whatever default interest we collect on your portion of the loan, for the period that your investment payments are in default.
Can I help you manage the loan?
No. Southern Cross Partners is authorised to manage the loan and make all decisions concerning all loans. If you have concerns, you are welcome to talk to our staff, but all decisions will be ours.
What information will I get about each loan?
You will be able to see specific information about each loan, including all of the terms and pricing, including the fees and interest margin that Southern Cross Partners earns. We will also provide any information that we consider is relevant to assist you to make an investment decision (such as a borrower’s default history, if any).
We will not provide you with any information that would enable the borrower to be specifically identified (this would be a breach of the Privacy Act), so you will not know the borrowers name or address. This means that you will not be provided with a copy of any valuation report, although we will tell you what we hold and what they advise the property is worth, together with anything else relevant from the report.
What happens if I want my money back before maturity?
Your investment is for the life of the loan and locked in until the loan repays. However, we do operate a Secondary Market service where, in some circumstances, you can re-offer your loan for sale to other investors. Click here for the rules for this service.
If a loan is in default, do I get any default interest?
You are not automatically entitled to any default interest if the loan is in default, however, Southern Cross Partners may elect to maintain your interest payments even if the loan is in default. If the borrower is in default and Southern Cross Partners elects to not maintain your interest payments, you will be entitled to 50% of the default interest that we collect on your portion of the loan, for the period that your investment is in default.
What happens if there is a shortfall when a loan is repaid?
Southern Cross Partners is not obliged to release it’s mortgage until a loan is fully repaid. However if circumstances change and the value of a property decreases substantially, it may be prudent for us to accept an amount that leaves a shortfall. If this occurs, the borrower is still obliged to meet that shortfall, and we will do our best to enter into an arrangement with them to repay us, which may include the services of a Debt Collector. If a Borrower offers a full and final figure in settlement of their loan which is less than the amount owed then we will seek the agreement of all investors in that loan. Where more than one investor has invested in that loan, the decision of those investors holding more than 50% (by investment amount) will be binding on the other investors. If the decision is evenly split then Southern Cross Partners will have the deciding vote.
Southern Cross Partners may decide that a mortgagee sale will yield a better return for investors rather than accepting a lesser amount from a borrower. This could also result in a shortfall of funds (which the borrower is still obliged to meet).
If there is a shortfall (whether from a mortgagee sale or a lesser loan repayment amount accepted by Southern Cross Partners), funds received will be applied as follows:
1st Statutory Costs (Rates / Levies / Legal Fees / etc) (as applicable)
2nd Enforcement Costs
3rd Investor Principal (on a pro-rata basis if more than 1 investor)
4th Investor Interest
5th Default Costs
Compounding Interest: How does at work?
Some of our investments offer Compounding Interest. This is available only to those specific investments identified as such on our web listings.
Interest is calculated daily and instead of being paid direct to the investors bank account, once a month, it is added back onto the investors principal investment. This happens on the 20th of each month. Reinvesting interest by way of Compounding Interest effectively enables an investor to earn interest on their interest. The total amount of interest earned will be paid along with the principal investment sum when the loan is repaid (see above for what happens if a borrower is in default and the loan is not repaid in full).
Are properties insured and are rates paid?
As part of the loan drawdown process, we will receive evidence that properties are insured and that our interest is noted on those policies. Despite this, it is possible that borrowers may let policies lapse or even cancel them, and whilst there is an expectation that Insurance Companies will notify us of that, this does not always occur. Insurance is always checked if any event occurs with a borrower, and it is a condition of their loan that the property is continuously covered. Occasionally we will pay insurance companies to keep properties insured, with costs for this added to the loan.
We receive confirmation that rates are paid to date when we provide a loan, but this does not mean that the borrower will continue to meet their rate payments. The Local Government Act gives the councils authority to claim unpaid rates from Mortgagees, so at times we receive these rate demands.
Initially we will contact the borrower to arrange payment, but at times we will be obliged to make these payments, with the cost added to the loan. Where Southern Cross Partners has paid these rates, then Southern Cross Partners will be refunded these amounts first where the loan is repaid including where the mortgaged property is sold at a mortgagee sale.
How do I invest?
You will need to complete our simple Application Form, which lets us know who you are, where you live, and how to get hold of you etc. There is also a more detailed financial information form that we need completed, which is necessary to meet the AML/CFT legislative requirements that we operate under. Just send that to us, with ID and proof of address and we will be in touch. Once your application is processed, we will give you access to the secure Investors section of our website. From here you can see a summary of all of the available investments, and details of any that interest you. All you then need to do is select your investment, lodge your money into our trust account at the BNZ, and then sit back and enjoy the returns. We’ll do the rest.
What is Peer 2 Peer?
P2P is a mechanism whereby an intermediary (us) puts an Investor (you) together with a borrower. The intermediary (us) manages both sides of the relationship.
The Southern Cross Financial Group has been providing mortgage lending since 1997 and Contributory Mortgage Investing since 2009. P2P is simply the modern term for what we have been doing for years. Where we differ from most other P2P providers* is that:
- We have proven experience and track record
- All of our loans (your investments) are secured by way of a 1st registered mortgage over Real Estate
- We use our own money to fund the loans initially, so this ensures that we have a robust credit system and are happy with each and every loan we make and then offer to our investors
*Some other P2P providers may have one or more of the above attributes.
Are you Regulated?
Yes. Our P2P business is licensed by the Financial Markets Authority (FMA) under an Act called the Financial Markets Conduct Act. The FMA has oversight over our P2P business.
In addition, there are a host of other Acts that we must adhere to.
Who holds the P2P License?
The license is held by Southern Cross Partners Limited. (This company was called SCFL Management Limited, and was our Contributory Mortgage broker, with the name change taking effect from the 1st of December 2016)
What happens if Southern Cross Partners fails?
In the unlikely event of a failure of our business, we have a contractual arrangement with another finance provider to take over the management of the business. There may be some minor interruption to services while the transition occurs, but things would quickly be back on track, with no adverse effect to our investors.
Of course the mortgage which supports your investment, as well as your interest payments, are all held in Trust by Loan Investment Trustees Limited. They do not form part of our business, and those funds / mortgage securities are not immersed in our business in any way. They are held completely separately, so any failure of Southern Cross Partners does not involve your Investment or your Interest Payments
What are Regulated / Non-Regulated loans?
The Credit Contracts and Consumer Finance Act 2003 creates a significant distinction between lending to ‘natural persons’ (called ‘Consumers’), and lending to ‘businesses’. Lending made to ‘natural persons’ is known as ‘Regulated’ lending, whilst all other lending is known as ‘Non-Regulated’ lending. To be classified as ‘Regulated’, lending must firstly be made to a ‘Natural Person’, so either an individual; a couple; or a group of people (but not a company or trust). Secondly, the main purpose of the lending needs to be for a non-business related purpose, for example, buying a home.
Regulated loans provide greater protection to borrowers, with stricter rules and penalty provisions for lenders.
If you would like to know more, follow these links to our Regulated Term Loan and Non Regulated Term Loan which include the terms and conditions applicable to each type of loan
What does LVR mean?
LVR or Loan to Value Ratio is, in percentages, the loan amount against the property value IE a $250,000 loan would have an LVR of 50% if the value of the property was $500,000
What is the minimum investment?
Our minimum investment is $10,000.00 per individual loan and is subject to availability. Each loan will have its own set minimum investment which can be dependent on the total loan amount and the number of preferred investors in a loan. For example a loan of $1m or more may have a minimum set of $100,000 allowing 10 investors to invest.
Can I have my name on the property title?
No. The first mortgage is registered on the title of the property by Loan Investment Trustees Limited, our trustee company. This is held in trust on behalf of the investors.
