You might have got your fingers badly burned with an endowment mortgage, but now you have a chance to invest your mortgage in your cellar.
Home Cellars, the brainchild of investment company and wine merchant Premier Cru Fine Wine Investments, is a mortgage repayment plan in which your mortgage is secured on the basis of the wine in your cellar.
Home Cellars works in a roughly similar way to the now-discredited endowment mortgages of the early 1990s. The money you invest as a borrower is used to buy a portfolio of fine wines. The idea is that over the years the value of the wines increases to the value of the loan.
If you are lucky you may have enough to pay off the loan and get to keep some of the wine at the end.
This has already happened, Stacey-Lea Golding, investment director of Premier Cru told decanter.com. One client arranged a £60,000 mortgage ten years ago. The entire value of the £60,000 was put into wine. ‘Now the mortgage has not only been rapaid in full but she also has £90,000 of wine left.’
The portfolio of wines is constantly changing, but its core is blue-chip Bordeaux hedged with top-level cru-bourgeois and solid lower growths. In the 82s there will be all the first growths as well as wines like Lynch Bages and Leoville Las Cases. In the 2005s they are avoiding the most outrageously priced and going for quality lower down the scale. The company concentrates on increasing the quality of the portfolio by selling off lesser wines as they mature and buying more blue-chip like Petrus.
As proof of the solidity of the investment, Premier Cru demonstrates via a graph on its website how a £10,000 investment in a fine wine fund in 1990 is now worth £89,760. This is against the £39,145 that the FTSE All Share Index would have delivered over the same period.
The plan is similar to an endowment policy, with a mortgage holder paying monthly sums into the Home Cellars scheme. That money is then used to buy fine wines, which belong to the mortgage holder, who pays a monthly charge for their cellaring. The owner can even drink some the wines, bearing in mind this will reduce the value of the overall holding.
Whether this will attract new mortgage buyers – Golding insists the plan is for all homeowners, not just super-rich wine investors – is a moot point.
Brokers contacted by the Guardian newspaper were unconvinced of its reliability. Nick Gardner at Chase de Vere Mortgage Management told the newspaper, ‘I would never recommend anyone using this as the sole repayment vehicle for their home. It’s far too risky.’
But Golding insistes the secret is simple – and gilt-edged. ‘There is overall growth every year. With a good wine in a good vintage, old wines are more expensive than young wines.’
Written by Adam Lechmere