A loan provider is offering finance to solicitors aiming to become equity partners in law firms – in exchange for a stake in the rising value of their home.
Castle Trust, which was set up with backing from private equity giant JC Flowers, says there is a market for people who cannot afford to enter into an equity partnership.
If solicitors have a mortgage and at least 40% equity in their home, Castle Trust will release 20% of the value with no requirement to make monthly repayments.
The loan has to be repaid when the home is sold or the end of the term, which can be up to 30 years.
When borrowers make repayment they also pay 40% of any increase in the value on the sale of the property from the date when the partnership mortgage was taken out. If the value declines or stands still, only the original loan amount is paid back.
Customers have to live in their property; they are not allowed to rent it out.
Sean Oldfield, chief executive of Castle Trust, said there is potentially ‘hundreds of millions of pounds’ that can be invested in potential equity partners.
‘Even for very successful people, raising capital to invest in an equity partnership can put substantial pressure on household budgets just as other domestic expenses are mounting up.
‘Our partnership mortgage enables them to raise money safely and securely and does not need to be serviced or paid back until they are ready.’
Castle Trust’s analysis showed average profits available for distribution to partners at the top 20 UK law firms were £510,000 in 2011/12. The top 20 firms had around 5,120 partners, a 5.8% increase on the previous year.