Season 7, Episode 30 - Solution-based Lending with Midkey

So let's get into, I guess, how it works.

So let's say as an example, we've got someone that's coming to us, they want the Midkey.

You know, they, uh, they're after, say, 500,000.

Mm-hmm.

You know, what, I guess, what are some of the things that we need to discuss and go through in terms of the terms?

Yeah.

Um, so the good news is, I suppose, we hand over the money, the $500,000, and then interest accumulates over the period of the loan.

And it's simple interest.

It doesn't compound.

So the important thing is there's no fixed loan term on Midkey loans.

So the borrower is put back in charge effectively here, and they decide when they repay us.

So when they repay us, um, so there's no payments during the... no, no principal, no inter- uh, interest payments from the time we lend the money to the time they decide to repay us, whether that be based on a property sale, a refinancing, or, you know, even expats returning and, and, you know, restoring their serviceability on the Australian market.

And, um, you know, so a range of different ways that people can refinance this out.

But the other piece of the Midkey loan, which is I suppose unique to us, which we call our exchange of value, is- In exchange for providing the capital, no monthly payments, we charge a deferral fee.

Yep.

So what's a deferral fee? A deferral fee is simply if, um, you've got a million dollar property and we lent $100,000, um, we would...

That would be a 10% LVR, and we would participate in 10% of the, um, u- upside of the property.

So what...

I think the thing about it is in designing Midkey, we want it to be aligned with the borrowers.

So we're sharing a little bit of the slice of the upside in the property, if that happens, um, with the borrower in exchange for the flexibility throughout the period of the loan which they decide, you know, what that is.

Yep.

And so you talked about simple interest and compounding, so this arrangement would be simple interest.

Do you wanna perhaps just give us an idea of the differences between the two?

Yeah, sure.

So simple interest, um, you are...