Do you want to be an Investor for a Private Funded Mortgage? 

Investors in private mortgages must be willing to become involved in the investment process and must know what their tolerance to risk is. They should fully understand what they are getting involved in before they agree to invest their money in any transaction. 

Investors must choose what sort of real estate they are willing to finance because this real estate will be the security for their investment. For those unfamiliar with mortgage financing it would be prudent to invest only in residential or recreational properties. A good rule of thumb is to invest only in a geographical area that you are familiar with and visit the property before you decide to make your investment. 

Yields on mortgage investments will be determined by risk. The higher the risk, the higher the yield. In today’s market you can expect a yield of 10% to 14% for a moderate level of risk. Minimum investments of $10,000 are required for private mortgages. 

The typical borrower, who needs private financing, would be a self employed individual or someone who may have had a bad credit history in the past. They may have a substantial cash down payment available but don't meet the stringent underwriting criteria of the banks. 

Another area where private funds are used is for cottages. The banks shy away from properties that are not inhabitable year round but if you are familiar with the area you may have no problem making such an investment. 

Within this area of investment, there is also another alternative, one in which you can use your already existing RRSPs contribution. The benefit is that you will earn the above interest rates, which will stay within your RRSP’s which will then compound and be tax free until you cash them in. 

In summary, private mortgages can be a very rewarding form of investment but they are very much a hands on investment. You must be willing to take the responsibility to choose the investment that meets your needs and your tolerance to risk. 

Contact us and we’ll guide you through the whole process!