Canada Mortgage Investment
Private Investing in Canada Mortgages
Many private citizens that have RSP funds or RRIF funds are disappointed. Their current returns in their registered funds are not doing too well, tired of term deposits with lousy returns, stocks and bonds that go up and down in value that are wishing for a better return by investing in private mortgages. They are choosing to invest in the private 2nd mortgage Canada marketplace. When done correctly the investment is safe. You can even use your RSP and RRIF funds to make investments in private mortgages.
Many citizens become investor/lenders in giving private Canada mortgages to other borrowers in the form of Canada equity home loans or Canada second mortgage loans. The earnings are very attractive. So are the safeguards.
The first safeguard is choosing the right Canada mortgage broker to do business with. At our site we have Gregory Stanley AMP CFP as the expert advisor on mortgages. He has expertise with 20 years experience in the financial services industry.
Gregory has a few rules about private mortgage investing.
Yes, rules. He won't act as your mortgage broker if the rules are not followed exactly.
- the mortgage investment must meet your risk tolerance. He ensures this by limiting mortgage investments to properties that only have strong resale value. Most properties in populated areas across Canada would satisfy this requirement. But the property has to be normal to the area, normal house on a normal city lot, on city sewer and water. Normal means normal.
- each property is subject to a satisfactory appraisal to the private investor. It is important that the property is not the worse one on the street or the very best one on the street. The property must be an average house on an average street and well maintained.
- the loan to value (LTV) ratio must be low. Gregory prefers that no investor/lender invest into any mortgage investment where the loan would exceed 75% of the appraised value of the home. Other brokers don't care and go up to 85%. But, Gregory doesn't agree with this practice. Gregory wants to see at least 25% equity still in the property after a 2nd mortgage Canada loan is made from the private investor/lender to a borrower.
- Owner Occupied residential properties only. It has to due with liquidity, and marketability. The property has to be owner occupied. No rental properties. Gregory believes that the best mortgage investments are ones where the owner is living in the home. Their home!
- A fair interest rate of return for the private investor. This is usually 12% on a 2nd mortgage loan and between 8 to 9.5% for a 1st mortgage. Again, the maximum LTV is 75%. Often the payments to the borrowers are based on interest only payments. So a $30,000 private mortgage investment would pay $300 per month interest to the private mortgage investor/lender.
- No third or subsequent mortgages for obvious reasons. No LTV past 75%.
- there will be no costs incurred by the private investor/lender because the borrower pays for all appraisal and legal costs. The mortgage broker does not charge a fee to the private investor/lender.
- diversify into several small mortgage investments rather than one or two large ones. For example, if you have $100,000 then Gregory would prefer to see you obtain 4 investments worth $25,000 than just one $100,000 deal. Gregory is trained as a certified financial planner and asset allocation and diversifying your investment holdings is something that he insists on.
- choose the right Canada mortgage broker to help arrange the loan between the private investor and you the investor/lender. Gregory Stanley was one of the very first mortgage brokers in Canada to become an Accredited Mortgage Professional, and he is one of the only ones to have also become a Certified Financial Planner. He has over 20 years experience in the financial services industry. He is friendly, sincere and helpful. On the homepage you will see him in the "Ask An Expert" section. Feel welcome to ask him a question.
So we have the following rules for private mortgage investing (1) Strong resale value of subject property (2) satisfactory appraisal (3) maximum 75% LTV loan (4) owner occupied residential property only (5) good rate of return i.e. 12% or 1% paid monthly (6) no third mortgages allowed (7) no costs to the investor (8) break up your investment into several smaller loans and (9) choosing the right Canada mortgage broker.
Gregory Stanley CFP AMP believes that by following the above rules the private mortgage investment is safe. The risk has been minimized as much as possible. And the reward of return is worth it. He believes in 'know your client' rules and will not let anyone invest that he doesn't think is right for it.
When you compare a fixed rate of return of 12% with no commission fees or management fees to other investments (i.e. mutual funds) there is no comparison for the rate of return versus risk. Gregory Stanley prefers secured mortgage investments.
Email Greg Stanley if you are interested in learning more!