How are we going to pay for the house?
The main chunk of the buying price (around 70-80%) will be covered by a mortage from an ethical bank. The rest of the money will be raised by issuing loanstock. We may also apply for a loan from Radical Routes. All of these loans will be paid off with rental income from Co-operative members.
What is loanstock?
Loanstock are fixed term loans made to the coop by individuals (like you, your family, or your friends) or organisations (like other coops). The interest rate and term (length) of the loan is mutually agreed upon by the loanstock holder and the co-operative. When the term of the loan is complete (5, 10, or 15 years, for example), the investment is repaid in full plus interest.
Why use Loanstock?
Loanstock allows co-operatives to raise capital in order to carry out their objectives without requiring members to invest a fortune in order to join. It is an important co-operative principle that personal wealth should not be a limiting factor to membership. Loanstock makes this possible and provides an opportunity for those with wealth greater than their immediate needs to make a worthwhile social investment.
When buying our house, we will need loanstock as a deposit on the house, and for other initial costs such as surveys, furniture, fees etc. It is an important part of getting a co-operative off the ground.
Loanstock is ideal as a highly targeted ethical investment because the money cannot be used for any purpose which is not in line with the co-operative’s aims and principles.
How much Loanstock are we seeking?
We are currently looking to raise £80 000 in loan stock to help us buy a house. For further info please have a look at our investors pack here: Investors Pack.
Thank you for your interest in our project, if you have any questions email us at firstname.lastname@example.org
Loanstock is unsecured. However, should any co-op get into extremely terrible financial difficulties they would sell the house. In this rather unlikely situation, excess funds from paying off the mortgage would be used to pay loanstock. Furthermore, the co-op would be obliged to pay loanstock to investors before recouping their own money. In practise, housing co-ops very rarely go bust.
*Investment in Redcurrant Housing Co-operative should be seen as a social investment rather than a means to financial gain. If you are in doubt about investing, you should consult an Independent Financial Adviser with specialist knowledge of social investments. This document is not an investment advertisement within the meaning of the Financial Services and Markets Act 2000 or a prospectus within the meaning of the Prospectus Regulations 2005.*