A Property118 contributor has detailed their due diligence process for investing in a 30-month company loan note, which offers a fixed annual coupon of 10% paid quarterly. This investment was made as part of a move away from rental property ownership towards retirement, seeking to reduce management work and risk concentration.
The company behind the loan note is a specialist mortgage lender for older homeowners, including those with Retirement Interest Only and lifetime mortgages. The investor sought to understand how the business could pay private investors 10% while lending at 6% to 9%, and how 30-month loan notes would be repaid if underlying mortgages had longer terms.
The investor noted that the lender has a verifiable public history, having completed its first public residential mortgage-backed securitisation in June 2024, involving a mortgage portfolio with a face value of £208.1 million. A subsequent report showed 1,226 mortgages with £199.2 million outstanding, a weighted-average loan-to-value of 45.35%, and a weighted-average borrower interest rate of 5.51%.
A second public securitisation was completed in 2025, with a provisional portfolio of 1,053 first-ranking residential mortgages totalling £188.8 million outstanding. At the cut-off date, the weighted-average current indexed LTV was 47.94% and the weighted-average mortgage rate was 6.17%. Only 0.15% of this portfolio was more than one month in arrears.