Financing through crowdfunding: all the ins & outs

Financing through crowdfunding: all the ins & outs

Crowdfunding offers flexibility and speed. This offers opportunities for a real estate developer: it is possible to switch quickly when a property has to be bought. As a result, financing via Max Crowdfund is often more interesting than, for example, at the bank. In this article, we zoom in more on the costs for the borrower.

Possibilities of financing through crowdfunding

Crowdfunding as a form of financing can be used in various situations. For example, it is possible to set up a crowdfunding project to collect investments that ensure you can develop a product you have come up with. Crowdfunding campaigns are also often used to collect donations for a good cause. The crowdfunding concept means several people simultaneously invest in the same fundraising campaign with a specific goal. This goal can be a starting capital for developing a product idea or a joint donation to a charity. Other goals that may not come to mind for most people are related to real estate. For example, it is also possible to finance a mortgage or a property development via crowdfunding. Below we would like to tell you more about both.

Mortgage via crowdfunding

The most common way to obtain a mortgage for buying a home is to submit an application to the bank. However, it may take a lot of time before your application is processed. Relatively high collateral is also a requirement before you get approval from the bank for borrowing such a large sum of money as with a mortgage. When a situation arises in which there is some urgency in assessing an application or the bank is not prepared to take on the risks of providing the loan, you could consider the option of financing via crowdfunding.

Finance real estate development

At Max Crowdfund, we offer real estate developers the opportunity to put forward their projects and submit a loan application. You must provide various documents that are relevant to your project. Our investment committee will review the application and determine whether your loan can be published on the platform. Naturally, this means that if the right securities can be provided, the project will be published as an investment opportunity for our connected users. The total amount is then financed by several investors through crowdfunding. The interest you pay on the loan amount also ends up with the investors. Does your project not pass our risk analysis? Then we are unfortunately forced to reject the application so that our investors are protected against the high risks.

How does a mortgage through crowdfunding work?

Since in the Netherlands, a maximum of 20% of the total mortgage amount may be financed via crowdfunding, the remaining amount will often still have to be lent by the bank. However, the part of the crowdfunding mortgage ensures that the amount you have to borrow from the bank is smaller. This generally results in a lower interest rate on this part of the mortgage because the bank has to take on less risk. The 20% you raise through crowdfunding is financed by private investors. Of course, you also have to pay interest on this. You then pay out this interest to the investors. This makes it possible for investors to earn a return on their savings. At Max Crowdfund, the focus is on loan applications submitted by real estate developers. The real estate loan then serves as a so-called bridging loan with the aim of, for example, buy-to-let or buy-to-sell. This means that the financing will be used for purchasing, renovating, renting, or selling real estate. Curious about how investing in loans works? Then visit our page: How does real estate crowdfunding work?

Why finance through Max Crowdfund?

When a financing application has been submitted to Max Crowdfund, we try to process it within 24 hours. Unlike the bank - where an application can take up to several months to process - we also strive for flexibility regarding loan conditions. The applicant indicates the preferences for interest, term, grace period (optional), final payment and/or profit-sharing. The more favourable the conditions for the investors, the faster the total target amount of the loan you have applied for will be financed. Furthermore, you do not have to worry about the administration. You periodically pay an amount of interest, repayment and costs via the Max Crowdfund Escrow account. We then distribute the payment among the participating investors. This allows you to fully focus on realizing your real estate project.

Real estate entrepreneurs who want to be eligible for crowdfunding financing via Max Crowdfund are asked to provide securities/collateral. These securities will (almost) always be in mortgage rights. This is, for example, a first right to a mortgage on the relevant property and/or the land for which the loan will be used, but this can also be other mortgage-free real estate owned by the applicant.

The costs associated with a loan application

There are several costs associated with the loan application. First of all, an applicant pays €250 excl. VAT for the credit assessment of the loan. If the loan is subsequently approved, €750 excl. VAT will be charged for publication and contract costs. After the loan has been completed and the cooling-off period has expired, the securities are established by the Max Security Trustee on behalf of the investors.

Furthermore, as a platform, we charge a one-off success fee of 2.5%, excluding VAT, calculated on the realized loan. The monthly administration fee is 0.06%, excluding VAT calculated on the original principal sum. The administration fee for incidental payments (e.g. profit sharing) is 0.5%, excluding VAT, calculated on the amount to be paid.

If the loan conditions are revised, we will charge 0.5% excl. VAT on the outstanding loan amount (with a minimum of €1000). It is also possible that a borrower repays early. If this is the case, 0.5% excl. VAT will be charged on the outstanding loan amount (with a €500 minimum) + 3 months bonus interest for the investors. All costs are listed again in the Max Crowdfund rate overview.

Frequently Asked Question

It is possible to partially finance a mortgage with crowdfunding. In the Netherlands, a maximum of 20% of the total principal sum that may be financed via crowdfunding applies. You must then repay this amount within 8 years. You must obtain the remaining part in the usual way: via an application from the bank. Are you a real estate entrepreneur, and do you want to apply for a mortgage with real estate development as a goal? Then you can submit your application to Max Crowdfund, subject to certain conditions. We will try to handle your request within 24 hours.
A crowdfunding mortgage is a mortgage financed by crowdfunding. This means that other investors have put money together to finance the mortgage.
An alternative to a bank mortgage can be crowdfunding. The mortgage is financed by a group of investors. At Max Crowdfund it is possible to have your mortgage partly financed by crowdfunding.